If youve read the reader mailbags for a while, youve noticed that I often get messages from people who have worked their way into a good financial place and now have some money to invest, often for the first time in their life.

They look around, watch CNBC, read investment advice online and in books, and still arent sure exactly what to do. Should they keep the money in cash, or buy a CD from the bank? Should they invest in stocks, and if so, should they buy individual stocks or put money in a mutual fund? What about bonds? What about real estate?

The options seem overwhelming, as do the potential risks and rewards. Im going to offer a few ideas that Ive learned over the years that will help anyone thats just starting to invest.

First of all, there is nothing that will guarantee you a great return. If anyone is guaranteeing you a large return and by large, I mean more than a couple percentage points higher than what youre getting in a savings account be very, very wary. Such investments usually have some sort of giant drawback, like losing all access to your balance for a very long period, hidden and/or extensive costs, or hidden risks that arent being directly revealed. Leave such too good to be true investments for people who are actually skilled investors and they probably wont be investing either.

Instead, most investments beyond a savings account or a CD offer potentially strong gains coupled with risk. Thats just part of the equation. What usually happens is that the better the estimated returns on an investment, the greater the risk.

Let me spell it out for you in detail using a specific example. The Vanguard 500 is a long-established index fund that essentially invests in 500 of the largest publicly traded companies in the United States. If you look at the returns on this fund. youll see that (for the quarter ending June 30, 2010) money invested in the fund has earned 14.33% over the previous year. Thats a very nice return.

At the same time, though, money invested in the fund has earned an average of -9.84% the last three years. Yes, each year (on average), an investor has lost almost 10% over the past three. Even over ten years, the average is -1.67%. Over the lifetime of the fund, though (since the mid-1970s), money in the fund has returned an average of 10.10% per year.

So what does that mean for you? It means that over the course of some years, youll have a 15% positive return. Other years will have a -30% return. Over some decades, itll average out to a nice positive 10% or so. Over other decades, like the 00s that had two economic downturns, itll average out to a very low positive or even a negative.

Sometimes you can afford that kind of risk. If youre many, many years from your goal, that kind of risk is fine. If youre 25 and investing for retirement, youre going to get enough great years between now and retirement that youre pretty likely to make up for the losses of the bad years. The key is to just ignore the year-to-year losses and gains and just be patient.

However, if youre closer to your goal, you cant afford that kind of risk. If youre saving for a goal thats going to happen in five years and you need to have the balance youve already saved up, youre making a big mistake to put it at this kind of risk. You need to keep it safe, even if youre losing the potential to have a big year.

You also have to look at your debts in comparison. Right now is a great time to pay down debt. Why? The return you get from debt repayments is equal to the interest on that debt. So, if you have a debt thats costing you 8% interest, an early payment on that debt essentially earns a guaranteed 8% return. Why? If your balance is lower (and thats what an early payment does), the lower balance will generate that much less interest that youll have to pay. Its important to note, of course, that actually acquiring new debt is really, really bad Im looking at debts here as water under the bridge and merely a problem to be solved.

Also, you can never, ever have too much money put away for retirement. It is never bad to over-save for retirement, because you can always use that money during the early years of your retirement for whatever things are most important to you knowing that youre secure for life.

Thus, here would be my very general suggestions for someone with a chunk of money to invest.

The first thing I would do is aim for debt freedom. Why? Paying ahead on debts is probably the best stable investment that people have right now. Get rid of your debts all of them.

If youre debt free, Id sit down and look at my life goals. Are there any big goals that I want to achieve in my life? Am I going to buy a house? Do I want to start a business, or launch a new career? Maybe youre really happy with how things are right now. If you have a strong overriding goal, keep the money in savings and have it help you reach that goal a lot sooner. Most likely, the goal will be short term enough that you shouldnt put it into stocks or other risky investments, for the reasons discussed above.

If you dont have an obvious overriding goal, open up a Roth IRA and put the money in there. A Roth IRA is a simple retirement account that anyone can open you just sign up for one with an investment house like Vanguard, much like signing up for a savings account at a bank. You put money in the account from your checking account, then tell the investment house how you want the money in the account to be invested. The best option for most investors is a Target Retirement fund that matches your estimated retirement date. You can contribute $5,000 a year to a Roth IRA if you have more than that, put it in a savings account and make contributions each year.

There are two things that people virtually never regret: freedom from debt and plenty of money saved for retirement. If you have money just sitting around, youve got two good things to do with it, right there.

A final tip: read. Pick up a well-regarded book on investing (heres my pick ) and read it at your own pace. Go slow and make sure you understand every sentence. Use Wikipedia and Google to help you understand terms. This is perhaps the best thing you can possibly do with your time as a beginning investor.