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Investing Rules Article from WSJ

protecting-the-bull-by-ynskjenIn the Wall Street Journal today there is an article by Mr. Brett Arends, discussing the rules for investing in the “next bull market”.  Mr. Arends frequently dispenses practical and useful advice, and this article is fits into that category.

The advice he offers is among the hallmarks of investing during any period – especially if you’re generally optimistic about the market in the long run.  Most individual investors would be very well-served to follow this advice.  Essentially he is saying:

  • be truly diversified in your investments – make sure you’re spread out among asset classes, time, tax treatment, and geopolitical sectors
  • don’t get caught up in the trends – when everyone is buying may not be the time to buy more; when the broker/salesman insists that you’re losing money by standing still, perhaps you should stand still.
  • practice patience – investing is not a “home run” or “get rich quick” activity
  • use your head – if you don’t understand the investment or why the investment is a good choice at this time, back away.  There are plenty of alternatives to consider.
  • have a strategy for rebalancing and/or changing your allocation mix.  Choices you made for investing five years ago will likely not be exactly the same as you would make today.  It pays to stick with a strategy, but it also makes sense to review and reassess your position from time to time.

All in all, a very good list of tenets to keep in mind – regardless of whether you believe this is the “next bull market” or not.  Plenty of money is made during all economic times in various investment activities; don’t feel like you’ve got to time your entry based upon what the evening news reports as a great time to invest.  By the time the news makes it to the general public, it may be too late in the game.  

As an example, as of this writing, emerging markets sector investments have built up a 28% gain in the last 90 days – and all the news has been about how awful of a time it is to invest.  A diversified portfolio would have done pretty well in the past few months, in spite of the news.

So what do you think?  Do you have a list of rules that you follow in your investment strategy?  Are they different from the guidelines I’ve listed above?  Tell us about them!

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