Thursday, January 27

10 commandments for investors

Dear Son

Here’s a great list of investor commandments. Nothing in here rings false. So how did your Dad do? well, your dad has frequent problems with number 10. And yes, Euphoria has lead me to problems. So whenever I feel like wanting to buy immediately, I wait for your mum to give me some money. Yes, I might miss a spike here and there but very frequently I find that it stops me from making stupid judgements. They should have added an 11th commandment. Get married to a very safe, conservative, doubting, debt hating, cynical, keeping you on the earth wife. Anyway, here’s the list.

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.”

Rest of the commandments, yes, I think I do tick them off as following them. One small thing, #5, I do invest in them but not directly. Buying good mining firms with broad based businesses with good management aint wrong in my opinion, but going straight into commodities or FX? nope.

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