Investing Learnings

Having a core investment philosophy is the cornerstone to successful portfolio performance. Think of it this way – the core investment philosophy is the “rules” or the “laws” that an investor will use to successfully manage their portfolio. Obviously it is important that these laws be based on certain investing best practices, but they also must be tailored to each individual investor given such things as time, knowledge, and desire. I have put a great deal of work into this over the years, and have provided what that looks like in a series of posts that you can see in the sidebar (to the right) under the heading The Dividend Guy’s Investment Process.

As I was digging around the web, I also ran across a series of pdf’s that were developed by the folks over at Vanguard. I wanted to provide these individual links to my readers as it is, in my opinion, the best representation of what will make a successful investor. In other words, if an investor follows these tenets their chance of success in the markets increases substantially. Here are the individual links to these documents, which are all pdf documents:

An introduction to the Vanguard Investment Philosophy
1. Investing is for meeting long-term goals; saving is for meeting short-term goals.
2. Broad diversification, with exposure to all parts of the stock and bond markets, reduces risk.
3. An investor’s most important decision is selecting the mix of assets to be held in a portfolio, not selecting the individual investments themselves.
4. Consistently outperforming the financial markets is extremely difficult.
5. Minimizing cost is vital for long-term investment success.
6. Investors should know how each investment fits into their plans and why they own that particular asset.
7. Risk has many dimensions, and investors should weigh “shortfall risk”—the possibility that a portfolio will fail to meet longer-term financial goals—against “market risk,” or the chance that returns will fluctuate.
8. Market-timing and performance-chasing are losing strategies.
9. An investor should not expect future long-term returns to be significantly higher or lower than long-term historical returns for various asset classes and subclasses.

Be sure to read each document, and not just the introductory one. There is a great deal of evidence that these principles are sound available in the individual reports.

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6 Comments   |  

6 Comments

Cash Instinct
May 2, 2008, 1:40 pm

Thanks for this ressource, it will be a very interesting read for sure.

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