In running a very tight stock screen recently for value plays Burlington Northern Santa Fe (NYSE: BNI) showed up on a list of 14 stocks. Interestingly all the large railroad stocks did. This reminded me of several stories I have done on the subject, the most recent being Chasing Value: Watch BNI -- the heck with Citigroup.

To summarize, about six weeks ago a Citigroup (NYSE: C) analyst declared it was time to sell the stock when BNI was trading in the mid $60s -- I said investors should do the opposite, it was a great value. Friday the stock closed at $76.98. Even at this price it is a value and ever more so with oil prices steadly creeping up.

Except for the chosen ones -- CEOs and the like who have outrageous salary and benefit packages -- almost nobody has been able to escape the financial pain in the world today.

'My pal Warren,' Chairman of Berkshire Hathaway (NYSE: BRK.A and BRK.B), who only draws a $100,000 salary, has watched his net worth diminished by billions of dollars as his stock has unraveled like everything else. I last read Buffett had a 31% stake in Berkshire so he understands his shareholders angst, even if he does not feel their pain. The stock has dropped from a 52-week high of $151,650 to yesterday's close of $77,500 for a loss of 49%.

Once again in quarterly SEC filings Berkshire's holdings were released and I could not help but wonder if this great holding company had not become one more giant index fund. There are a lot of quality names in the mix including:

• Burlington Northern Santa Fe (NYSE: BNI)
• Coca-Cola (NYSE: KO)
• ConocoPhillips (NYSE; COP)
• Johnson and Johnson (NYSE: JNJ)
• Kraft Foods'A' (: NYSE: KFT)
• Procter and Gamble (NYSE: PG)
• U.S. Bancorp (: NYSE: USB)
• Wells Fargo (NYSE: WFC)

The above referenced stocks are all down with the market and there are still more that might be considered fallen angels or turn-around plays within Berkshire's holdings that include:

• American Express (NYSE: AXP)
• General Electric (NYSE: GE)
• Goldman Sachs Group (NYSE: GS)
• Home Depot (NYSE: HD)
• Lowe's Cos (NYSE: LOW)

In addition to these publicly traded stocks Berkshire holdings include privately held Geico Insurance, See's Candies, Dairy Queen, Florsheim Shoes, and a multitude of others. Since so many stocks have been accumulated over the years I started to view BRK as a stock index and with that in mind did some comparisons between the Standard & Poors 500 and BRK.

The following is a three-year chart that illustrates that buying BRK instead of the index anytime in the last three years would have been beneficial by a 30% margin.

1. Get Your "Sleep-At-Night" Allocations Right. The most important investment decision we make is what percentage of our nest egg to put into cash and bonds.

Everyone today wishes they'd put 100% of their money in cash or bonds. But bond investors shouldn't sleep as well as they think -- the protection comes at a very high price. Bonds provide the lowest rate of return and over the years. Inflation eats away a lot of the value of the monthly income. From 1925 through 2003, U.S. bonds only appreciated 5.4% per year, or 61 times, while stocks appreciated nearly 10.4% per year, or 8,000 times.

Stocks are volatile, but over long periods you get paid for the sleepless nights. You just need the time to wait out these markets. Money you need for the next five years should be in bonds or cash. The panicked sellers didn't get these allocations right. If you're 50 years old and lamenting over the equity values in your 401K, remember, you're not allowed to touch it for 10 years anyway. That's a long time!

This is the retirement disaster that won't get much media coverage: A study conducted by researchers at the University of Illinois at Urbana-Champaign and the Federal Reserve Board shows (subscription required) that employers are increasingly turning toward pricey actively-managed mutual funds for their 401(k) plans rather than lower cost, better-performing index funds.

Only 11% of U.S. stock funds added to 401(k) plans between 1998 and 2002 were index funds. This in spite of the fact that there are volumes and volumes and volumes of research showing that buying actively managed mutual funds is just not a very good idea. For more on this, please read A Random Walk Down Wall Street and The Little Book of Common-Sense Investing.

The problem isn't just the employers and managers/brokers, who should be beaten if they're not offering index funds. According to The Journal, "A recent survey by Vanguard of plans for which that firm provides record-keeping services found that, though nearly all participants were offered a U.S.-stock index fund, only half invested in it."

Yikes. This latest bit of news is evidence of two things: 1.) Many investors really don't know how to invest for their retirement and 2.) The people who are supposed to be helping aren't making it much easier.

The Dow Jones Industrial Average fell a long way today dropping 387 points and we can all look forward to reading and hearing why in the coming hours. For me, I preach calm. Either you have developed an investment style and portfolio that allows you to rest easy and stay calm over major market hurdles or you are worried silly. If you are worried silly then I still preach calm...of a different sort. You should calmly transform your portfolio to one that does allow you to find peace in down markets. For the calm seekers:

• More cash - less leverage
• Industry (sector) diversification - not specialization
• Large companies paying dividends - not small caps paying nothing
• Index funds - not developing market funds
• Dow Utilities over Dow Industrials
• Time in the market - not timing the market

What would you add to the list to get through difficult markets? What gives you peace, when all around you seems to be behaving badly? Have you made changes or adjustments in your portfolio over the past few months? What were they? Time to share, because this market is going through some real growing pains and your experience and wisdom might help someone. Perhaps some milk and cookies might help.

Those of you who are new to BloggingStocks can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well - INCLUDING ANY BAD CALLS.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

When Warren Buffett talks, investors should listen -- especially when what he says echoes the sentiments of other investing legends like John Bogle and Burton Malkiel, as well as vast reams of academic research: If you try to pick stocks or mutual funds, you will probably not beat the market, especially after expenses. Therefore, your best bet for the long-term is low cost index funds, which are designed to track the performance of indices, such as the Dow or the Wilshire 5000.

At the Berkshire Hathaway (NYSE: BRK.A) annual meeting, Warren Buffet once again expressed his support for passive investing, saying that "A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money...The gross performance may be reasonably decent, but the fees will eat up a significant percentage of the returns," he said. "You'll pay lots of fees to people who do well, and lots of fees to people who do not do so well." He even conceded that he would be "amazed" if Berkshire Hathaway's portfolio outperforms the S&P 500 by more than few points, given its size.

I agree wholeheartedly with Buffett's ideas. There is simply no reason for most investors to buy actively managed mutual funds. On a governance level, his statement about paying lots of fees to managers who don't perform well may strike at the root of the mutual fund problem: They are compensated for gathering assets, not performing well. Given a choice between staying small and doing well or growing large and doing not so well, the choice is obvious for most fund managers: Grow big because the expense ratio is based on assets under management rather than earnings.

The compensation system makes no sense: Why should someone be paid more for underperforming with 100 million in assets than outperforming with 50 million in assets? But until that changes, mutual funds will continue to focus on asset gathering at the expense of shareholder returns. And that's one good reason to stick with index funds.

Mark Hulbert discussed an interesting new study in Sunday's New York Times. He sums it up: "Don't even consider holding actively managed mutual funds unless you're willing to switch funds often. All other fund investors should simply buy and hold an index fund for the long term."

The author of the study argues that mutual funds underperform over the long-term not because of the inability of professional managers to pick stocks, but because of the way money flows into funds affects returns. That's right! Blame yourself for the poor performance of your funds! Basically, Jonathan Berk, the University of California professor who wrote the paper, argues that managers who perform well attract greater investments and so the funds stop performing well.

The professor suggests a complicated method of checking your funds regularly and selling bottom-performing funds and buying top-performing ones -- sounds to me a lot like performance-chasing. It also seems to run contrary to Berk's complaint that managers who perform well take on too much in the way of assets. Isn't performance-chasing what causes that problem?

Particularly given the costs of switching funds frequently (mainly taxes), I think investors will still do far better owning index funds. It's a lot easier too, isn't it?

Warren Buffett has acknowledged investing in Johnson & Johnson (NYSE:JNJ) and the Procter & Gamble Co. (NYSE:PG) in the past few years. Among all the endorsements a company could possibly get, this is better than a 5-Star rating from Morning Star and a a boooyaah! from James Cramer combined. Of course, Mr. Buffett's choices are far more limited than yours or mine, given the size of Berkshire Hathaway (NYSE:BRK.A), the vessel he is navigating that could have been included in this review as well.

I was looking once again at large, well diversified companies that are broadly held by institutions and individuals alike that most investors would generally agree are safe havens. To round out the discussion, I have added General Electric Co. (NYSE: GE) and PepsiCo Inc (NYSE:PEP). There are several others that could be added to this group but I have enough for this post's purpose.

The question is whether investors are better off buying into a few broadly held index funds or better off holding a few dividend paying large cap stocks? I am a firm believer in keeping at least half of the money you save, invested in the stock market, placed in indexed mutual funds, or exchange traded funds with low fees and low stock turnover, minimizing short term capital gains.

Picking stocks is fun. It's exciting. It can be very rewarding over a short period of time. Better yet, it can give you bragging rights at holiday parties.

Buying and holding mutual funds has none of those benefits. But it can be quite rewarding over the long term and is a very affordable way to invest. (For more on this, see, "Top5 Low-Cost Mutual Funds."

There are lots of great reasons to make mutual funds the core of your portfolio. Here are seven to consider:

1. Funds are easy. Never invested before? Just call your favorite discount broker or no-load fund company (Vanguard comes to mind), tell them you want a good solid fund for your first investment (large-cap growth or S&P Index funds are good options for first-timers) and they'll hook you up. No muss, no fuss. You'll be investing before you know it.

2. Funds are cheap. Think about it: Buy a no-load fund with a very low 0.15% expense ratio and you can invest $1,000 a year, including all trades and administration fees, for just $15 a year. And you thought stock trading for $7 a trade was cheap! (Warning: Not all funds are that cheap.)

3. Funds are professionally managed. Okay, so actively-managed funds don't typically beat the S&P 500 and usually have much higher expenses than index funds. But the best fund managers often beat the market. And you get the benefit of knowing that if the market starts to tank or a major blue-chip stock goes down the tubes, there is a real person at the helm who might be able to sell ahead of the pack.

4. Funds don't implode. Put another way, funds are diversified. That simply means that you get the protection of owning about 50 stocks, hopefully in an assortment of different sectors, so your risk of having one stock-specific disaster decimate your portfolio is minimized.

5. You can always have fun with stocks on the side. Once your core portfolio is buttoned down with stable, diversified growth funds, then you're free to use long-term conservative and short-term speculative stock-picking to add some excitement to the mix -- without having to worry about screwing things up too badly.

6. ETFs. That stands for exchange-traded funds. They are index funds that trade like stocks. So you can enjoy the excitement and tax advantages of trading stocks, while getting the low fees and diversification benefits of funds.

7. Funds are fun. Okay, they may not be as fun as owning stocks. But the best fund companies will make you feel like part of a smart, exclusive club. If you're lucky, your fund manager may even write entertaining newsletters and show up in magazines now and then. Most important, good funds have consistent long-term positive results. You may not feel much like bragging about earning a steady 10% a year. But you'll certainly be able to pat yourself on the back for a job well done come retirement.