I think when it comes to the stock market, irrespective of the volatility, I would keep a 10 year investment horizon! In other words, think very hard before buying a stock and when you do, don't PANIC and sell on the spot! Take the emotion out of the equation.

How do yo pick the stocks? Try and choose a sector that you think meets your criteria and is within the realm of your understanding. Pick industries that you have some knowledge of trends, you will do much better in the long term. Furthermore, pick leaders in the sector that you choose.

Try and identify new technologies coming to the market, ie I like the Solar Technology and Virtualization Sector! These are really good sectors that will bring in fantastic growth that will allow lots of room for more competition. Take the case of VMW Inc, a new player to the market..It looks like the Microsoft or Google of this sector. Try and do research on this sector and determine if the company meets your criteria!

But, never engage in day trading or margin buying! As it brings nothing but grief always! This way there is no reason to panic..

Also, another idea is to nimble into Real Estate! I think this market is badly beaten and recovery should occur towards end of this year!