8 Guides to Successful Investing

1.         Keep your expectations in line with history.  Historically stocks have returned between 6 and 7% after inflation over the last two centuries and have sold at an average P/E ratio of about 15.

2.         Stock returns are much more stable in the long run than in the short term.  Over time stocks, in contrast to bonds, compensate investors for higher inflation.  Therefore as your investment horizon becomes longer, put a larger portion of your assets in equities.

                3.         Invest the largest percentage of your stock portfolio in low-cost passive funds.

4.         Invest at least two-thirds of your equity portfolio in international stocks.  Stocks in high-growth companies often become over-priced and yield poor returns for investors.

5.         Historically, value stocks – those with lower P/E ratios and higher dividend yields – have superior returns and lower risk than growth stocks.  Tilt your portfolio toward value by buying passive portfolios of value stocks.

6.         Finally, establish firm rules to keep your portfolio on track, especially if you find yourself giving in to the emotion of the moment.  If you are particularly anxious about the market, sit down with your adviser and review your plan – if your goals have changed or the probability of your achieving those goals over the long term are far greater or lesser than expected, action needs to be taken to get back on track.

7.         It doesn’t do any harm to seek a second opinion when investing, as long as the opinion with whom you seek alternatives has the integrity and authenticity (reputation) to provide balanced advice.

8.         All investment market decisions are temporary.  Volatility does not represent loss.