Top 15 Investing Rules

  • Rule 1: Only invest money you can afford to lose.
  • Rule 2: Do not buy all shares at once. Dollar cost average. I typically buy 20–25% at a time. Leave room in case it goes lower.
  • Rule 3: No F.O.M.O.! Fear of Missing Out. If it runs, let it. Don’t chase.
  • Rule 4: Never be afraid to take profits. I’m not suggesting you liquidate a winner, I’m simply saying take a few chips off the table. Trim 10–20% of your gains when a holding becomes frothy. You can always buy more shares when they go down. This is important for outperformance.
  • Rule 5: Diversify your portfolio to hedge risk.
  • Rule 6: Separate all emotion from investing. This includes dwelling on past decisions.
  • Rule 7: Do your homework! If you can’t explain to someone at least three good reasons to buy a stock, don’t buy it.
  • Rule 8: Patience is critical to long-term investing success. If you lack patience, hire someone to manage your money for you.
  • Rule 9: Expect corrections and embrace them. These are buying opportunities.
  • Rule 10: Always have some cash, a.k.a. “dry powder”. 5–10% at a minimum. There’s nothing worse than having no cash when your favorite stocks are on a fire sale.
  • Rule 11: Cut your losses. If a story changes, and you lose confidence in the future outlook of a company, DO NOT buy more. Cut your losses and move on. Repositioning capital quickly will allow you to recover faster.
  • Rule 12: Beware of hype. If your neighbor who casually invests tells you about a hot stock, you are likely too late. You will buy high and sell low. This also goes for social media, television shows, etc.
  • Rule 13: Focus on moats. If a company is best-of-breed, especially with no or little competition, it’s likely a winner.
  • Rule 14: Don’t let anyone tell you the best strategy for you. Try to learn from others like a sponge and make your own path. Each person has different goals, timelines, and suitability.
  • Rule 15: Likely most important of all: have a plan and stick to it!

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MBA, Software Sales Executive, Personal Finance Coach, Stock Market Guru, “F.I.R.E.D. Up” Mastermind, World Traveler, Father, Husband, www.FiredUpWealth.com

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