Sunday, 28 April 2013

Investment Rules

I'm a rules person.  Not in that I like people imposing rules on me.  That doesn't always go over so well.  I am, however fond of structures and guidelines on my own terms.  I make my own rules so that I know  that everything is in order.  Which means I have investment rules, of course.  While these rules are not hard and fast they give me a good guide of what to look for when buying investments and are the compilation of many many books that I have read.  They are as follows:

- Don't try to beat the market, match it using Index Funds.
- Never hold more than 75% of your total portfolio in Stocks or Bonds
- Never hold less than 25% of your total portfolio in Stocks or Bonds
- Keep at least 30% of your portfolio in foreign investments
- Use monthly dollar cost averaging instead of trying to time the markets
- Always look at the mutual fund/index fund's annual operating expenses, they should not be more than:*

·      Taxable and municipal bonds-------------------0.75%
·      U.S. Equities (large and mid-sized stocks)---1.0%
·      High-yield (junk) bonds-------------------------1.0%
·      U.S. equities (small stocks)---------------------1.25%
·      Foreign stocks-------------------------------------1.50%

There are guide lines that I try to follow with all investments.  These guidelines do still offer a lot of flexibility depending on when you intend to use your money and what your risk tolerance is.

**Maximum annual operating expenses are courtesy of Benjamin Graham's "The Intelligent Investor"

Have a question?  I'd love to hear it!

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