We all want to be successful investors. It’s not even a difficult concept—just learn the rules, follow them and you will undoubtedly be a winner. The only slight stumbling block is to understand whose rules you’re going to play by and whether they make sense to you AND you can follow them to a practical and logical conclusion. Therein, lies the rub.
If you take a minute, you too can uncover the secrets to brilliant investing, as long as you can settle on whose rules to follow. In just a quick search on Google, you will find:
25 Rules of Investing—The Street
Warren Buffet’s 5 Rules For Investing
The Six Rules of Intelligent Investing
10 Golden Rules of Investing in Stock Markets
7 Basic Rules of Investing
12 Timeless Rules of Investing
Sir John Templeton’s 16 Rules
Bernard Baruch’s 10 Rules of Investing
8 Wise-Guys Rules for Investing
John Bogle’s 10 Rules of Investing
The Five Rules for Successful Stock Investing
The 5 Iron Rules for Investing
Need I go on? Every “expert” has rules to try and demystify or simplify that which is impossibly complicated. It’s like the concept of eating the elephant, which for sure, needs to be swallowed one bite at a time. Rules make us feel safe, provide borders that we can understand. We are taught that in pre-school—just follow the rules and you won’t get in trouble. Except…
Whose rules do you follow? And why will you pin your success on someone else’s list? While there are some serious heavyweights contributing their set of rules—they might not all apply to you, your situation or your money mindset. Your ability to find success is a carefully woven basket of beliefs, behaviors and habits combined with a desire to reach an attainable goal.
You might have the desire to accumulate great wealth, but if you spend carelessly and have no history of saving—your chances are dim.
If you want your money to grow, but do not have the risk tolerance to invest money outside of a savings account—real growth is impossible.
You may be hankering to buy real estate, but if you can’t get out of your way long enough to put in an offer because you’re stuck in the details—it just isn’t going to happen.
Rules are wonderful, if: they are meaningful, relevant and easily followed. When following someone else’s rules, ask yourself whether there is an agenda behind their rules. And is there a belief system that is congruent with yours? No matter how sensible the rules might appear, if they don’t hit home, if they don’t align with your values, you probably won’t follow them very closely.
When I took a closer look at some of the items on the list of lists, I found enough cringe-worthy precepts to toss the entire set into the trash bin. For example, one set of rules contains the following:
Diversify to Control Risk
It’s hard to argue with that rule, but moving further down the SAME list, is the commandment:
Don’t Own Too Many Names
OK, you lost me.
Another list contains the rule: Make Informed Decisions (proper research). Sounds like a winner to me, but then one should consider the source of the information, the subjectivity of the information, your ability to discern fact from opinion, and the variability of the unknowable unknowns.
Yet another item states: Invest in businesses you understand. Hmmmm. What does THAT mean? So, if you understand that a Pharmaceutical company makes drugs, is that enough to understand the business? Or do you need to know what’s in the pipeline, what’s coming off patent, how much they spend on research and development, what percentage of stock is owned by institutions or executives and have they been buying or selling, who is their competition and what are their earnings estimates, how often have they hit their numbers, are there any changes in management, is there significant litigation…. How much is enough in order to make an “informed” decision?
The magic rules to success are rarely found in a Google search. Investing success starts with your values, your dreams, your family and your desire to live a satisfying and healthy life. Start with that.