There are only three golden rules to investing: don't lose money, look after what you've got and make as much as you can. Keeping a balanced portfolio in the very broadest sense is the key to all three.

To start, have a real and honest assessment of your own personal circumstances.

Here are some key questions to ask:

• Can you afford to invest?
• What are you already investing in?
• How old are you?
• What are your investment goals?
• How much time do you want spend managing your money?
• How wealthy are you?
• How much can you afford to lose?

Having answered these, take a careful view of investing and what to invest in.

Rainy day money or long-term investment?

The unexpected happens. Stashing some cash in a safe savings account earning a reasonable rate of interest is the prudent way to be prepared for the unexpected.

Hold enough cash to be able to pay for emergencies and for one decent investments purchase in case a worthwhile opportunity comes your way.

The opposite of rainy day money is a pension.

Unlike cash savings, you can't usually withdraw your money until you retire. On the other hand personal pension contributions are often tax deductible depending where you are domiciled for tax purposes.

A personal pension with a large and solid pension provider to which you contribute over many years is a valuable asset for later life when you can no longer earn an income.

And another important long-term consideration is life insurance. The question to ask here is: what if I passed away tomorrow? Would my wife and dependent children or other relatives be adequately provided for?

Other insurances such as critical health and long term care are also worth considering. Not really investments? For sure they don't pay a dividend, but if you are stricken with a really serious illness and can't earn a living, you may end up by saying that the critical health cover you bought was the best investment you ever made.

Collective investment schemes such as mutual funds, investment trusts or unit trusts are a good place to start for medium to long-term investments. One which offers a spread of government bonds and more remunerative corporate bonds and shares will be likely to be low risk

The higher the risk, the better the reward

What about higher growth investments? What about a high technology stocks or a small company fund where the returns can be very good? With all the press coverage there's been in the last year or so you don't need me to remind you of how risky these can be. But by investing in a fund that contains a spread of investments you can smooth the risks. Most fund management and insurance firms offer such funds.

But do remember taking on risk in this way does not mean gambling your every remaining cent. It can mean seizing current investment opportunities safe in the knowledge that your portfolio is well grounded in more stable, less volatile investments.

Maybe it's now time to set aside some cash to invest in equities? Setting up a separate trading account perhaps with an on-line broker can be a good idea. Firstly because it means you will have the funds handy when you want to deal. Secondly, by ring fencing your stock market account you will be less likely to overstep what you can afford.

Received wisdom says that you should only invest on the stock market what you can afford to lose. And the fact of matter is that a stock market investment is a bet on the future. But by careful examination of the risks and opportunities faced by the companies you invest in, you should be able to narrow down the chances of losing money.

Building a balanced portfolio is not just about buying a fist full of different shares. The picture needs to be broader than that. And don't forget the value of your home and other property you may own, because this is most people's biggest investment.

The end result of taking a broad view and carefully allocating funds to each type of investment is that you should be able to do well according to those three golden rules of investment: don't lose money, look after what you've got and make as much as you can. And you'll be able to sleep more soundly at night.

Richard Willsher is a London-based finance and investment writer. With a background in investment banking he has written for the Financial Times, the Wall Street Journal and is former editor of The Investor.