2/11/2013 4:30 PM ET|
An investor’s manifesto
Successful investors have a game plan, and they stick to it through good times and bad.
I am an investor. I do not trade my assets frequently. That's speculation, not investing.
I am also a saver, fueling my investments with continuous savings from current income.
I know that every kind of asset entails risk -- even cash, which can be eroded by inflation.
I know that higher returns entail higher risk, in every kind of asset.
I accept those risks, but I mitigate them by owning a diversity of assets.
I regard my home as a place to live, not as an investment. It is not a substitute for retirement savings.
I have an investment plan and a plan for asset allocation, in consultation with a financial adviser.
I invest regular amounts every month, in both rising and falling markets. I know I cannot gauge market tops and bottoms. If I receive a windfall -- a bonus, bequest or gift -- I gradually feed it into my regular investment mix.
I don't pour more money into hot markets nor completely cash out of plunging markets.
I spread my investments among several asset classes, in a mix fitting my age and risk tolerance.
My share of bonds roughly equals my age. I will allocate to stocks a declining portion of my financial assets as I get older.
I rebalance my portfolio every quarter. If the stock market plunges, pushing my stock allocation way below its target percentage, I sell bonds and use my cash to buy stocks.
I force myself to sell high and buy low by periodic rebalancing -- just what is temperamentally difficult for most investors to do.
I know that stocks are risky in the short run, so I hold in equities no money for which I have a likely need in the next three years.
But stocks are not too risky in the long run. They have outperformed all other commonly traded assets over periods of 15 years and longer.
Foreign stocks account for at least 15% of my stock allocation. I believe that developing economies will enjoy much higher growth than the U.S. in the decades ahead.
I never borrow against my stocks. Margin calls could force me to sell good assets at a bad time.
I stick with my game plan. I do not check the value of my investments every day or even every week.
I try to keep my cool when other folks are losing theirs.
I remind myself often: I am an investor.
More from Kiplinger's Personal Finance magazine:
VIDEO ON MSN MONEY
Baron Rothschild: "Buy when there's blood in the streets."
"I rebalance my portfolio every quarter."
I thought you said you didn't trade. Rebalancing feeds Wall Street and costs you money in fees and commissions. If you truly have a balanced portfolio, you shouldn't need to make adjustments this frequently.
Great article.If people actually followed that advice we wouldn`t have all these bears
that hate the market because they bought high and sold low.
You have to have a PLAN !! Then have a BUDGET within to work the PLAN !
What a concept ;)
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.
Equity indices faced an uphill climb from the opening bell after disappointing quarterly results from Google (GOOG 536.10, -20.44) and IBM (IBM 190.04, -6.36) weighed on the early sentiment. Google reported earnings $0.15 below the Capital IQ consensus estimate on revenue of $15.42 ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'