“The share market’s slump since late 2007 has been punctuated by company failures. How do investors avoid getting stung by these?”

There are only two sure ways. Option one: “Use The Force, Luke”. Option two: Don’t invest.

Sadly, precious few of us have completed any formal Jedi training with Obi-Wan Kenobi or Yoda.  And not investing isn’t a viable option.

Company failures suck. Big ones. As do markets that fall by 55 per cent. But while we continue to ignore communism as an ideal (remember George Orwell’s Animal Farm), we’re stuck with the mistake-prone, but ultimately more raunchy and fun, system of capitalism.

How do you invest without doing your dough? With no guarantees, here are a few risk-reducing techniques for non-Jedis.

Diversify: At least 12 stocks spread across many industries (holding 15 resource juniors is not diversification). If one company implodes, you’ve only done 6.7 per cent of your investments.

Managed funds/Listed investment companies (LICs): Australian share managed funds typically invest in a minimum of 30 companies – instant diversification. Low-cost operator Vanguard’s ASX200 invests in approximately 170 stocks. LICs, such as AFIC and Argo, have even lower management costs.

Use pros: Professionals, such as stockbrokers and financial advisers, have a constant eye on the market. But it doesn’t mean they won’t make mistakes (unless their surname is Skywalker).

Maintain the love: Too many fail to monitor their investments. You have to read newspapers. Yes, it’s time consuming. And you can’t decide to do it for the first few months, then forget about it.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser.