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One key goal of the 2008 edition of The Neatest Little Guide to Stock Market Investing is to help people keep a cool head when others panic. You may have noticed that many investors are panicking these days, as the market keeps heading lower on fears about the sub-prime mortgage crisis and a possible recession in America.

What's the smart thing to do?

Like Bill Miller at Legg Mason -- who's featured in Chapter 2 of the 2008 edition -- I average down relentlessly. I rarely sell stocks as they fall and, when I do, it's usually because they're looking likely to fall from a high point of gain. Rarely, such as when I took a flier on speculative stock Charles & Colvard in late 2006, I'll set protective sell orders to guard against catastrophic loss.

In general, though, I'm on the hunt for good businesses selling at a discount to their future potential. If I can increase that discount by lowering my average cost per share, I will. This requires faith in the company behind the stock, but I almost always have faith in the companies I own. I write "almost" because I have speculated occasionally on mere price movement alone, as mentioned above. That is the exception, however, not the rule.

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A lot of people wonder how I came up with the Maximum Midcap strategy featured in the 2008 edition of The Neatest Little Guide to Stock Market Investing. It's wildly popular with readers and onlookers because it has beaten more than 95% of all mutual funds in the past five years.

In the first edition of the book way back in 1998, I focused the permanent strategy portion of the book on traditional ways of beating the Dow Jones Industrial Average. Those usual ways are the Dow Dividend strategies, which seek to beat the overall Dow by buying the 10, 5, or fewer stocks that provide the highest dividends. It's a good approach, but not great.

In the second edition in 2004, I discovered that by just doubling the returns of the entire Dow I could beat all of the Divend Strategies over time.

In this third edition, I took that a step further by finding an entirely new index with which to beat the Dow. What I wanted was a group of stocks that rose higher in strong markets and fell lower in weak markets. "Could there be such an index?" I wondered.

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Have you ever heard news about the stock market and been unable to make sense of it? Have you ever felt that stocks are complicated, rather boring, and something that only guys in suits on Wall Street think about?

A lot of people say "yes" to both questions. My mother did. When I was a college student and first took an interest in finance, I talked to her about retirement late one night at our kitchen table. She told me she wasn't sure what to do with her retirement account and asked me if I'd like to have a look. I said yes, and a career was born.

From that day forward, I devoted myself to decoding finance for regular folks who really don't want to spend their time poring over charts and calculating ratios. All most people want is a comfortable retirement, a new house, a college education for their children, and other financial goals.

What I discovered is that there's not as much to it as the industry would have you believe. Think about it. If they can convince you and millions of others into thinking that investing is too complicated, then more people will be willing to turn over their money to professional managers. All that money under management earns fees, so more money means more fees. Simple system, eh?

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Jason Kelly is our guest blogger during the week of January 14th. If you have any questions for Jason Kelly, add a comment to any of his posts. Here is some brief information about The Neatest Little Guide to Stock Market Investing:

For over a decade, Jason Kelly has provided investors with the insider knowledge and time-tested strategies they need to maximize their investment programs. This thoroughly updated edition of The Neatest Little Guide to Stock Market Investing includes:
• Kelly’s Maximum Midcap Strategy, an innovative investment program that consistently outperforms the market
• Real-life examples of investment strategies that paid big dividends
• Tips from master investors like Warren Buffett, Peter Lynch, and Bill Miller

An accessible, intelligent, and highly effective approach to investing, The Neatest Little Guide to Stock Market Investing is an invaluable resource for investors everywhere.