Money Magazine recently ran and article that I found interesting. It cited rules from some of the smartest investors of all times. Here are a few that you should pay particular attention to:
1. “He that is overcautious will accomplish little.” —Friedrich von Schiller
This theory suggests that investors should take calculated risks. To earn higher returns, you have to put some of your money in riskier assets like stocks and stock mutual funds.
2. “For age and want, save while you may; no morning sun lasts the whole day.” —Benjamin Franklin
Have an emergency fund! A serious financial plan has three to six months’ living expenses set aside in an ultra safe bank account.
3. “The real key to making money in stocks is not to get scared of them.” —Peter Lynch
Don’t time the market. Nobody knows when the markets will turn down and by the time you realize it an advance may have already begun.
4. “The world is a book, and those who do not travel read only a page.” —St. Augustine
Diversifying with international holdings will not necessarily increase your returns but historical performance has revealed that global portfolios are less risky.
5. “There is nothing new in the world except the history you do not know.” —Harry Truman
Keep things in perspective. When the Dow sheds 300 points in a day, it is natural to feel scared. On the other hand it is easy to conclude that the market is “on a run” when it has a quick surge. I guess it is the media’s way of instilling excitement.
6. “In every house of marriage there’s room for an interpreter.” —Stanley Kunitz
Talk with your spouse as he/she is your most important financial partner. Sure your financial advisor is important but it is your spouse that has ownership in your life.
These tidbits of knowledge may not be revolutionary but sometimes all we need to hear is a reiteration of the basics.
Personal update
Kathy, Christopher, Emily and I have returned from the mountains! We rented a home in the Adirondacks and took a great picture from the top of the mountain. The other picture of Emily is one taken later that day when she was bundled up. What great kids they are!
