The 10 Investment Commandments by Wade W. Slome, CFA, CFP®, Investing Caffeine

Posted January, 2011

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 a 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 abilit 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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