Top 10 Rules for Money
Top 10 Rules for Money
July 7, 2021 8:30am by Barry Ritholtz
Ten Simple Money Rules for Investing Success
Bad decisions and poor behavior are the primary reasons why many fail to meet their financial goals.
Creating lists1 is a useful way to organize your thoughts: I have created lists of rules for Investing, Valuation, Stock tips, Goldbuggery, even useless financial phrases to avoid. I find these exercises to be valuable ways to figure out what I think. Thinking about money – saving it, spending it, and most of all, how to invest it – is something I have spent decades doing. This has led to recognizing several fundamental truths about capital.
Naturally, I have organized these rules into a list:
My Top 10 Rules for Money
1. Investing Is Both Simple and Hard: The basic premise behind successful investing is easily understood: “Invest for the long term, be diversified, watch your costs, and let compounding work its magic.”
But following through can be challenging. Humans are plagued by an inability to just “sit there and do nothing.” Failing to do nothing leads to costly errors and loss of capital that erode returns. Understanding what is required is very different than being able to perform, regardless of circumstances, for decades on end.
This leads us to:
2. Behavior Is Everything: The inability to manage emotions and behavior is the financial undoing of many. To paraphrase William Bernstein, “the extent you succeed in finance is based on your ability to suppress your limbic system. If you can’t do that, you’re going to die poor.”
Even the greatest stock pickers will underperform if unable to control their emotional impulses. Allowing those emotional hot buttons to get pressed is how people go wrong in investing. There are no shortcuts, secrets or get rich quick schemes that work, except for my 3-day workshop where I reveal the secrets of the ultra-rich for the low, low price of $4,995. Sign up here.
3. Moderation In All Things: Think of the majority of the assets in your portfolio -– hopefully a diversified, global mix of passive index funds — as the basic meat and potatoes of investing. You can add seasonings, herbs, and vegetables to spice it up and add some flavor.
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