Seven Investing Principles


From Morningstar's Vanguard Diehards forum, in conversation 5937, come these words of wisdom from contributor PxLiu:

Faced with an unknowable future, my basic investment philosophy can be boiled down to a few basic prinicples:
  1. Define your goals
  2. Diversify across different asset classes according to your time horizon, financial situation and risk tolerance
  3. Minimize costs and tax consequences
  4. Add new money regularly
  5. Periodically rebalance to bring your portfolio back to your target allocation. But do so in light of consideration number three.
  6. As you approach the time you will need the money, start tilting your portfolio toward those asset classes with lower near term volatility.
  7. Stay the course
Lastly, realize that you can do everything right but still not reach your goals. As Bogle reminds us in the epilogue of his first book, "..the race is not to the swift. Nor the battle to the strong...but time and chance happeneth to them all."


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