Bedrock Investing Principles

Five Bedrock Principles for Investors

The List:

  1. Diversification is how you limit the risk of losses in an uncertain world.
  2. Emotions: You are your own worst enemy. (You can be the best stock picker in the world, capable of finding tomorrow’s winning businesses before anyone else. But if you panic and sell during the next bear market, none of it will matter.)
  3. Volatility: There is a price to pay: The price of admission to earn high long-term returns in stocks is a ceaseless torrent of unpredictable outcomes, senseless volatility and unexpected downturns. ... The reason stocks offer superior long-term returns is precisely because we can’t forecast what they will do in the short run.
  4. Eschew High Fees: When in doubt, choose the investment with the lowest fee. As a group, investors’ profits always will equal the overall market’s returns minus all fees and expenses. Below-average fees, therefore, offer one of your best shots at earning above-average results.
  5. Time: Time is the most powerful force in investing. ...Wealth grows exponentially—a little at first, then slightly more, and then in a hurry for those who stick around the longest.
Comments: Image source. My own comments:

  • We started very late. I could blame circumstances but really the blame is upon me. 
  • Kathee are I are not stupid but we really muddle through some of this. We are very good earners and good at being frugal (see earlier article). But investing: Some knowledge and some dumb luck. 
  • We try to value invest with companies that we feel will make money long term. Examples: IBM, Wells Fargo, MMM, Apple. 
  • We do not use a wealth advisor. We did for several years. Paying a W.A. 1% fees seems like a waste to me. 
  • With regard to time and volatility: We don't have anything invested where we feel we would need to bail out if the market declined. We are in it for the long haul. 

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