Investing Principles
These big-picture principles and techniques are the building blocks upon which successful investing plans are constructed. Most investors focus their learning effort on specific investments, when in reality, it's mastery of these core principles that usually dictates the success or failure of an investment plan.
Are your investing decisions primarily driven by outside influences? Or do you make them based on a predetermined plan stemming from your unique situation? Here's a four-point checklist based on "inside-out" thinking to help evaluate your investing options.
If you haven't settled on an investing strategy yet, you'll be interested to know that while techniques vary widely, all successful investing strategies have certain elements in common. We explain six core principles and how to apply them when crafting your investing strategy.
Risk is the investor's four-letter word. Everybody is risk-averse. We all would prefer a certain, or riskless, result. It's rational and normal to be concerned about investment risk. At some point though, normal concern becomes irrational fear, and that exaggerated fear keeps many people from making appropriate investment choices. There are many types of risk, and various techniques to manage and reduce those risks. But one investment decision looms larger than any other in determining your ultimate risk and return. This article examines that crucial decision.
The biggest obstacles to successful investing often involve our own emotions. Logically, we know that buying stocks when prices are low makes sense. But we feel so much better about investing when the market is going up! As a result, many investors buy near market tops and stop buying during bear markets, exactly the opposite of what they should do. Dollar-cost-averaging is a mechanical strategy that helps avoid these pitfalls by removing emotion from the investing process. Here you'll learn five specific benefits of DCA and see how to implement a DCA investing plan of your own.
Austin shares four things that encourage and comfort him when periods of distressing stock market losses suddenly arrive.
With the fresh outbreak of hostilities in the Middle East recently added to already nerve-wracking economic news, it's no wonder investors are skittish about the stock market's prospects. But how much impact do these type of news "events" really have on the market's direction? Austin explores this question and offers three lessons history can teach us.
Putting this market ideal into practice is tough on the emotions, but ultimately rewarding for your pocketbook
When markets get as volatile as they've been lately, many investors consider heading for the sidelines. That usually ends up being counterproductive and hurting their long-term returns. We've got information to help you face your fears and stay the course.
A personalized financial plan is the foundation of a successful investing strategy. It's the compass by which you set your investing sails as the currents of life change. Sadly, most investors never complete this crucial step. This article walks through the process of creating a personal financial plan by highlighting important items to consider at each stage of life. Make 2007 the year you replace good intentions with action — create a financial plan of your own!
Successful investing can be tough. Not only do you need to know what to do, but you have to actually do it, often at times when everything within you is screaming to do the opposite. That's why SMI tries to create strategies that minimize the internal conflict between knowing and doing. Consider these seven ways SMI's investing strategies make it easy on you to do the right thing.
Lurking in the portfolios of millions of investors is a time-bomb threatening their financial security. This threat comes from the most unlikely of sources: your employer's stock. We explain the risk and offer guidelines to determine how much is too much.
One feature brokers promote to unwitting customers is access to the supposedly valuable research their firm's analysts produce. But is brokerage research actually worth much at all? Come along for a peek behind Wall Street's curtain — a place where "Buy" sometimes actually means "Sell".
Mustering the courage to start investing is a difficult hurdle for many people. We have encouraging news to report in this regard. By carefully adjusting your asset allocation and time horizon, you can stack the odds dramatically in your favor.
When markets correct, it can be a very unpleasant emotional experience for investors. These 8 keys can help us remain calm even in the midst of a stomach-churning market decline.
Noted investor Charles Carlson once wrote that long-term investors get rich during bear markets — they just don't realize it until later. Why is it that when fear runs rampant through the markets, some investors panic while others make their fortunes? Jason Zweig's excellent new book on "neuroeconomics" explains the tricks our brain plays on us when it comes to finances and the emotions they inspire. In this article, he helps us understand that most dangerous of investing enemies — fear.
"Foreign stocks were up 25% last year? I wish I'd had all my money in foreign funds!" It's a familiar lament. But as natural as it is to wish you'd predicted last year's hot market segment, it's also unrealistic. We show why this is true, and explain how a diversified portfolio is the best path to long-term investment success.
Most investors love bull markets and dread bear markets. But are those affections misplaced?
Stock investors have a number of helpful tools to measure risk, like standard deviation and SMI's relative risk scores. Similar tools exist for bond investors as well. We examine one of the best and explain how to apply it when selecting bond funds for your portfolio.
What's the difference between a puzzle and a mystery? The answer has profound implications for our investing lives.
For 16 years, SMI has explained what you should do with your finances. This month we're trying the opposite approach by showcasing ways to ruin them. For guidance, we turn to a rich and funny guy — Ben Stein. So enjoy the laughs as you read these "pointers," but don't miss the serious messages lurking just below the surface, and be sure to read Ben's eight simple keys to financial success at the end of the article.
Recent months have been scary for stock investors. Many question whether putting money into stocks is a good idea when the future direction of the markets looks so uncertain. Here, we examine how an investor would have fared starting an investment program just as the bear market of 2000-2002 began. We think you'll be encouraged to see how the powerful combination of dollar-cost-averaging and SMI's Upgrading strategy successfully counteracted even those worst of market conditions.
In our guru-enamored financial culture, predictions can make or break an investing career. But are these predictions really helpful, or harmful? Austin suggests there's a better way to align your portfolio for success than by following the predictions of so-called experts.
Mutual funds come in two primary flavors: those that charge a sales load, and those that don't. Debate has raged for years between the two camps over the merits of each type. We break down the arguments and offer our take on the situation.
Part of being a successful investor over the long-term involves knowing how your portfolio has performed recently so you can make appropriate adjustments. That's easier said than done for most people though, as the math can get tricky. We offer a simple shortcut that can provide the rough rate of return for any account in a few short minutes.
If you are an investor, it's inevitable that you will occasionally experience setbacks, confusion, frustration, uncertainty, anxiety, and disappointment. How you respond to events and to your emotions will have a big impact on your success, or lack of it. Your investment plan will be more likely to succeed if it is designed to use your psychological strengths and overcome your weak spots. This article highlights three key areas to watch out for, and provides some useful tools to keep your emotions from leading you down the wrong path.
The case for building an investment strategy on index funds is compelling and easy to understand. We explain with a helpful analogy from the world of tennis.
What are the "growth" and "value" styles of investing? Should you favor one over the other? Discover the meaning of these important investing terms, and learn how to best combine both approaches within your portfolio for maximum gain—and minimum anxiety.
Quitting sometimes gets a bad rap. Austin explains how quitting these six behaviors will help in your pursuit of becoming a successful investor.
When the markets are rough, as they have been lately, the allure of market timing becomes exceptionally strong. Who wouldn't want to take part in most of the market's gains, then step aside and avoid its painful declines? Unfortunately, reality is a little more complicated than that. Here, Austin relates lessons from his decade as a professional market timer and explains the keys to success for those who wish to pursue timing further.
Avoiding the big pitfalls is an important ingredient in financial success. Here are nine key errors to steer clear of in your pursuit of a better financial future.
In the investing world, risk and return are inextricably entwined. But many times investors evaluate opportunities with their focus solely on return, neglecting to fully consider the potential risks. That can be a big mistake.
As people learn more about investing, there's a tendency to focus more and more on the complicated and arcane, and forget the basics. Here, two seasoned Wall Street observers pull our attention back to six common sense lessons that have big consequences.
Have you ever considered what keeps our complex economy operating efficiently, automatically sorting out competing demands for limited resources and directing them to where they are most needed at any given time? It's the system of free market pricing. This brilliantly simple explanation of prices and their function will help you realistically evaluate the many proposals for government intervention in the free market that we are likely to hear this election season.
