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The 10 Investment Commandments

Investment Commandments

The 10 Investment Commandments

Moses ascended Mount Sinai to receive the powerful spiritual words of the Ten Commandments from God on two stone tablets and then went on to share the all-important, moral imperatives with his people. If Moses was alive today and was a professional investor, I’m sure he would have downloaded the “ 10 Investment Commandments ” from Charles Ellis’s Winning the Loser’s Game on his e-reader, and then share the knowledge with all investors. I’m the furthest thing from Moses, but in his absence, I will be happy to share Ellis’s valuable and useful 10 Investment Commandments for individual investors:

1)      “Save. Invest your savings in your future happiness and security and education for your kids.”

2)      “Don’t speculate. If you must ‘play the market’ to satisfy an emotional itch, recognize that you are gambling on your ability to beat the pros so limit the amounts you play with to the same amounts you would gamble with the pros at Las Vegas.”

3)      “Don’t do anything in investing primarily for tax reasons.”

4)      “Don’t think of your home as an investment. Think of it as a place to live with your family-period.”

5)      “Never do commodities….Dealing in commodities is really only price speculation. It’s not investing because there’s no economic productivity or value added.”

6)      “Don’t be confused about stockbrokers and mutual fund salespeople. They are usually very nice people, but their job is not to make money for you. Their job is to make money from you.”

7)      “Don’t invest in new or ‘interesting’ investments. They are all too often designed to be sold to investors, not to be owned by investors.”

8)      “Don’t invest in bonds just because you’ve heard that bonds are conservative or for safety of either income or capital. Bond prices can fluctuate nearly as much as stock prices do, and bonds are a poor defense against the major risk of long-term investing – inflation.”

9)      “Write out your long-term goals, your long-term investing program, and your estate plan – and stay with them.”

10)   “Distrust your feelings. When you feel euphoric, you’re probably in for a bruising.”

We all commit sins, some more than others, and investors are no different. A simple periodic review of Charles Ellis’s “ 10 Investing Commandments ” will spiritually align your portfolios and prevent the number of investment sins you make.

Read More about Charles Ellis (article #1 and article #2)

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  • Bob Jennings

    This list is awful and shouldn’t be followed by anyone who is looking to get into investing. This might have been solid advice 10-20 years ago but not any more. 8 out 10 of this list start with a negative connotation and don’t even give you an idea of what you should do. Here is a real list;

    In no real order;

    Invest what you can, when you can, and as often as you can.

    Ultimately, you want to work towards investing at least 10% of your net income.

    Diversify.

    Your age minus 100 is the percentage of your portfolio you should hold in stocks the remainder you should invest in bonds (e.g. 30 year old should have 70% of their portfolio in stocks and 30% in bonds).

    The majority of stocks you invest in should be through mutual funds.

    If you want to invest in a companies stock pick a company whose products you use and believe in.

    A home is one of the best investments there is. It fulfills a basic need, increases your credit, builds equity and provides tax breaks.

    Compound interest is king.

    Knowledge is truly power . The more you know about how to invest the more successful you will be.