Comments on: 35 Rules of Common Sense Investing

By: Michael L. Snodgrass

Michael L. Snodgrass — Sun, 16 Oct 2011 12:50:06 +0000

It’s kind of funny, but I woke up early this morning and just started writing down some of my investment strategies. Then later this a.m. I Googled a search to read others’ investment philosophies. Your ideas and mine pretty much paralleled each other (of course, your list is much longer.) I am keeping your list because it is so simple and applicable. Thanks!

By: Jarkko

Jarkko — Sun, 09 Jan 2011 11:03:12 +0000

Clean up your finances before you invest… Yep.. Normally people invest more when they need more (to pay their debts), but that is not the case. It has to be reasonable.

By: Pinyo

Pinyo — Tue, 29 Jan 2008 02:05:52 +0000

@Personal Finance HQ – For the most part, I am still true to my 35 rules. However, I have been shifting slowly away from individual stocks and even mutual funds where I can, and moving toward low-expense ETFs. I believe that overall, ETFs are superior to both mutual funds and individual stocks.

By: Personal Finance HQ

Personal Finance HQ — Mon, 28 Jan 2008 23:31:44 +0000

Good tips there. I’d be interested to hear how your rules have helped you out during the recent market turmoil. Have you learned any new lessons? Or have recent developments shown the strength of your strategy?

Certainly for me, stop losses got me out of a lot of stocks fairly early in the drop. I then had the cash to buy back as things started rising again last week. I just hope this ‘recovery’ holds .

By: Pinyo

Pinyo — Sun, 13 Jan 2008 14:42:40 +0000

@Cheapster Bob – Thank you and welcome to Moolanomy. When I wrote this, I traded a little more actively. Since then I have begun to move away from individual stocks, so some is not as applicable as much. However, the list is comprehensive enough to be useful for a variety of investing style.

Right now, my style is closer to what you described — very good by the way. However, I would take it a step further and use index ETF instead of fund. This should cut your expenses by another 0.2% to 0.5% — this could be a lot of money down the road.

@Paradise – Welcome to Moolanomy and thank you.

@NM – I will have a look at these sites. I quickly glanced through them and they seem interesting. As I told Bob above, I have recently shied away from individual stocks and have been focused more on building a balanced portfolio of ETFs.

By: nm

nm — Sun, 13 Jan 2008 11:37:08 +0000

Before I make my investment decision final I check http://www.socialpicks.com , http://caps.fool.com and http://www.gstock.com These sites help me figure out if my investment decision is ok.

By: Welcome to Paradise

Welcome to Paradise — Sun, 13 Jan 2008 06:53:23 +0000

This is quite an informative post. I agree with most of them. I’ve made a copy of this post. I hope to utilize them in my daily routine.

Thank you.

By: Cheapster Bob

Cheapster Bob — Sun, 13 Jan 2008 03:50:53 +0000

Nice information and I agree with most of them for active traders. However, I like to keep things easy and dumb.

Have a month or two earnings in a high yield savings account.

Invest in your companies 401K to the max.

Invest in a good traditional or Roth I.R.A.

If you still have money left buy a simple S&P type index fund making regular auto investments.

Stock trading usually loses to mutual funds which loses to the S&P index 80 percent of the time.

That’s just my opinion though…

By: Pinyo

Pinyo — Wed, 01 Aug 2007 20:19:22 +0000

Trainee Investor – thank you for your very thoughtful comment (and nice blog by the way!). I agree with you absolutely. These rules are very generalized. Here’s some more thought on some of the points.

#1: I should clarify as bad debt – i.e., credit card, high interest loan, etc. It would not be wise to wait to pay off your home mortgage before investing.

#6: Yes, very profitable but not for typical investment beginners. You need a certain level of expertise to work with illiquid investments.

#15: Agreed.

By: traineeinvestor

traineeinvestor — Wed, 01 Aug 2007 14:44:54 +0000

That's an interesting list and provides a lot of food for thought. However, I'm not sure if I would agree with all of the items on the list. In particular:

#1 if you mean pay off expensive consumer debt, I agree. If you mean pay off debt used to acquire assets, if the cost of debt is less than the expected return, then keeping a manageable level of debt can be a good thing;

#6 illiquid investments can be very profitable. The key is to make sure you have enough liquidity in your portfolio to ride out any rough patches;

#15 not everyone needs and emergency fund. I view them as unnecesary and wasteful;

#17 reallocation is an interesting subject. There are studies which show that rebalancing too often or to rigerously is not the best strategy. A less rigerours approach (such as redirecting cash flows) is often better;

#26 dollar cost averaging may reduce risk, but it has also been shown to reduce returns compared to a lump sum investment.

Lastly, some of the items on the list seem appropriate for an active trading strategy. Others are more suitable for passive or longer term investing.