My 10 Rules of Investing

Investing can be a powerful tool for building wealth and securing your financial future (and very scary as well!). I clearly remember when I first started investing; I opened a trading account and deposited a mere $100 bucks. And I was so afraid of losing any money at all that all I did was paper trading for a long while. However, it's not a game of chance or luck; it requires a well-thought-out strategy and adherence to some fundamental principles. Whether you're a novice investor or a seasoned pro, these 10 rules of investing will serve as a valuable guide to help you make informed decisions and achieve your financial goals.

My Rule #1: Set Clear Investment Goals

Before diving into the world of investing, define your objectives. Are you looking to save for retirement, buy a home, or fund your child's education? Having clear, measurable goals will help you determine your investment horizon, risk tolerance, and the appropriate asset allocation.

My Rule #2: Diversify Your Portfolio

The old saying, "Don't put all your eggs in one basket," holds true in investing. Diversification involves spreading your investments across different asset classes (such as stocks, bonds, real estate, and commodities) to reduce risk. A well-diversified portfolio can help mitigate losses during market downturns. This may sound really cliche but having all your investments in one asset is extremely risky and risk management is key to wealth building and retention.

My Rule #3: Invest for the Long Term (Plan your Exit Strategy)

Investing is a marathon, not a sprint. Resist the temptation to chase short-term gains and focus on a long-term perspective. Historically, patient investors who hold their investments through market fluctuations tend to reap the rewards of compounding returns. In my own experience, chasing short-term gains usually ended up with (1) realizing much lower gains due to early exit and (2) end up paying more commission and fees due to re-entry into position after realizing that investment still have much more potential for more gains.

My Rule #4: Understand Risk Tolerance

Every investor has a unique risk tolerance based on their financial situation, goals, and personality. Assess your risk tolerance honestly and choose investments that align with it. Don't let fear or greed drive your decisions. If you have money that you absolutely cannot lose, do not invest with that money!

My Rule #5: Research Before You Invest

Knowledge is power in the world of investing. Take the time to research potential investments thoroughly. Understand the company's financials, the industry it operates in, and the broader economic factors that may affect it. The more you know, the better-equipped you'll be to make informed choices. Do not chase new trends just because you heard from somebody's uncle that a particular investment is good!

My Rule #6: Avoid Market Timing

Attempting to predict market movements is a risky endeavor. Even the most seasoned professionals struggle with market timing. Instead of trying to "buy low and sell high", focus on a consistent investment strategy and stay disciplined over time. Although it makes perfect sense to "buy low and sell high", always plan your exit strategy first before execution.

My Rule #7: Keep Costs Low

High fees can eat into your investment returns over time. Look for low-cost investment options, such as index funds or exchange-traded funds (ETFs), which often have lower expense ratios compared to actively managed funds. Fees can really eat into your margins if you trade and change positions too frequently too.

My Rule #8: Embrace Dollar-Cost Averaging

Dollar-cost averaging (DCA) involves investing a fixed amount of money at regular intervals, regardless of market conditions. This strategy can help smooth out the impact of market volatility and reduce the risk of making poor investment decisions based on emotions. Be aware that you also want to make sure that the investment that you add more positions into is a sound investment choice. If the investment looks like a terrible choice from the start, don't keep pouring money into it, consider it a loss and either sell it or hold it. As I mentioned before, do your research!

My Rule #9: Monitor and Adjust Your Portfolio

Your investment strategy should not be set in stone. Periodically review your portfolio to ensure it aligns with your goals and risk tolerance. Rebalance your holdings if necessary to maintain your desired asset allocation. Do not blindly keep buying just because the price has dropped, and someone's friend said it is a good time to "buy the dip".

My Rule #10: Stay Informed

The investment landscape is constantly evolving. Stay informed about market trends, economic news, and changes in tax laws that may impact your investments.

That's it for my 10 Rules of Investing. I believe these rules should help to set the fundamentals into your investment strategy. Have a safe and rewarding investment journey!