Top 100 Investment Lessons I Have Learned – Part 1
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What I like the best about investing is that it is a never ending learning experience. Every time I turn around I have learned something new and will have become a better investor because of it. That being said, I just went through a bit of a process for the purposes of my blog to come up with the top 100 investment lessons I have learned to this point. I am going to break this up into 4 parts, with the first 25 in this post.[ad#tdg-embedded]
1. Asset allocation is more important than individual stock selection
2. A core portfolio of index funds is less volatile than individual stocks
3. Dividend growth dramatically increases your income over time
4. Regular rebalancing is important to keep my asset allocation to target
5. Employee stock can make up to much of my portfolio very fast – I need to sell it from time to time to reduce risk
6. DRIPs are not an investment strategy, they are a tool
7. Mutual fund fees are too high given most of them do not beat their index
8. Investment fees are the largest negative component to a portfolio – they steal gains from me
9. The lowest cost online broker is usually better – those extra services for the additional fees are usually available for free elsewhere on the web
10. Investing is a long term process and there are periods of time where it seems like you are getting nowhere
11. Having an investment code is important to ensure that investment decisions are made based on strategy and not on emotions
12. Emotional investment decisions are always wrong
13. The easiest way determine your bond allocation is to set it to your age
14. Employer matches to savings plan is like free money – maximize it whenever possible
15. Be conservative when you determine your true risk tolerance – it will save you from stupid emotional decisions later
16. Compounding your investment returns is the fastest way to see investment gains
17. Small-caps are an important asset class to include in your asset allocation
18. Value stocks are also very important
19. Index funds offer an easy way to get diversification
20. Leveraged ETFs are way too risky and are not meant to be held for the long-term
21. Accounting games (i.e. earnings manipulation) happens and is very hard to uncover
22. It is usually smart not to let any one asset make up more than 5% of your portfolio
23. Markets are unpredictable and I am not good at forecasting which way they are going to move
24. My first job as an investor is to figure out how I am not going to lose any money
25. At the end of the day, I make the decisions in my portfolio and can only blame myself if things go wrong
That is it for today. Stay tuned as next week I will post Part 2. In the meantime, let me know what you think about the first 25.
11 Comments on this post
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Brad said:
Great list. I agree that #24 is the first thing. Investors probably will make more by avoiding losing money then trying to guess how to make money.
October 22nd, 2009 at 5:59 pm -
Manshu said:
Great post! I am not so sure about diversification though. I think that needs to be expanded a little more and defined more properly. Simply buying different category of assets don’t do much for diversification.
October 23rd, 2009 at 6:32 pm -
Pacific said:
I also think #24 is the best advice – avoid loosing money!
However, in # 22, the word ‘asset” should be changed to “individual investment” to avoid confusion with the term “asset allocation”.
Looking forward to the next 25!November 6th, 2009 at 12:09 pm -
Hermann Ditzig said:
I’m new to your site and 3 years old in investing. But as I’m almost 90% invested in dividend yielding stocks and ETF’s, MLP’s, Canadian Trusts, REIT’s, and BDC’s, I’m very interested in getting as educated as I can….quickly.
Because I’m new I haven’t really had the chance to assess the value you provide on this cite. What I do appreciate is your sharing the things that you feel are worthwhile to explore further. But 100 things???? Yes it will keep me coming back.
In the end could you perhaps agree to tell us the top 10 things most important to you. Your brain may be bigger than mine…..but my brain can’t keep 100 things in focus.
November 22nd, 2009 at 6:51 am
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