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The Truth Is Out There

The Seven Noble Truths Of Investing

1. Knowing who you are (as an investor) is important.  If you don’t know who you are, the stock market is an expensive place to find out.  The smart way to go about investing is to first figure out who you are, and then come up with a plan that fits you.  For example, some investors are hyper-sensitive to market declines.  But other investors have a long-term perspective about the market and don’t get upset when it goes down.  If you’re hyper-sensitive to declines, you might sell your stocks too quickly, when the correct strategy might be to hold on, or even add to your holdings.

2. Taking the time to sit down and write an investment plan is the single most important thing you will ever do as an investor.  The second most important thing is reviewing your plan regularly, and making the adjustments that are necessary.

3. Having the right balance in your portfolio is much more important to your long term success than picking good stocks.  Balance accounts for 95% of your results, while stock selection accounts for just 5%.

4. The most powerful force in finance is tax-deferred compounding.  The second most  powerful force is time itself.  Unless you are maximizing both of these concepts, you are giving money away and you will never get it back.

5. If your personal wealth is growing at less than 10% per year, you have a problem with your investment plan.  The biggest causes of leakage are costs and panic selling.  Both of these should be addressed in your written plan.

6. The source of your advice is just as important as the advice itself.  This is because most investment professionals have financial incentives to steer you in a particular direction – the one where they make the most money.  This isn’t illegal, or even immoral.  It’s just the way the business works.  It’s important to develop advice and information sources that are truly independent, and therefore are free to speak the truth.

7. Amateur investors think in terms of what’s possible.  Professional investors think in terms of what’s probable.  It’s possible that you will find the next Microsoft and become fabulously wealthy, but it’s not probable.  It’s both possible and probable that you can grow your personal wealth at a steady 10% annual rate if you stick to a well-written investment plan.

To learn more about these truths, or for help with your investment plan, visit my website at