I posed the following question to a group of clients, friends and colleagues; “What’s
the best investment advice you ever got”? This advice comes from people of different ages, life stages, and
varying degrees of net worth.
After reviewing the responses it became clear that there were distinct categories to
which most of the responses could be assigned. Here are the
responses by category (some edited for brevity while keeping the central
theme):
“…taking a conservative approach rather than a risky approach…having 20-40% of your
investment portfolio in fixed income really does protect on the downside when
you go through a year like 2008”
“…layer the investment risks (within your portfolio), stable, growth and aggressive
elements with varying portions (based upon circumstances)”
“The vast majority of investment returns are determined by how your assets are allocated”
“Don’t try to time the market or go ‘all cash’…be ‘in the market’ all of the time”
“Quiz your advisor when they significantly under or overweight (a portion of your
portfolio) compared to the S&P”
“…if you try to make money by trading you will likely be fleeced by the brokerages and
investment banks who run the casino”
“Look at the portfolio returns over long periods of time rather than how you did last year”
“…when (a company’s) bad news contradicts the expectations set by management…don’t wait
around for more bad news”
“…sell immediately when (a company) announces a cut to the dividend”
“Hope is not a strategy…be honest with your investments and make decisions on facts”
“Don’t listen to analyst buy or sell recommendations…do your own research”
“Don’t invest in something you don’t understand!”
“Buy a duplex as your starter home…you can live in one side and rent out the other”
“Start investing in the stock market early…high school or even grade school is not too
early”
“If you buy a business also buy the land and buildings…if the business fails you still have
the real estate”
“Slow and steady wins the race”
“To be happy, live beneath your means”
“If you can’t live on 100% of your salary, you can’t live on 95%, live on 95% and start
saving 5% of your income every year…it will add up…”
“…the earlier you get started the power of compounding returns over time makes a huge
difference”
“Pay yourself first!”
“Every time you get a raise in pay, increase the amount you save.”
“Open a college savings account when your child is an infant, you’ll be glad you did”
This story has implications beyond sound investment advice. It seems
especially appropriate as we approach Father’s day 2011.
“When I was much younger and making my first investments, I was visiting with my father (a
product of the great depression), and was very proud when I told him, “Dad, I
made 400% on a tech stock that I purchased”. He calmly replied,”‘maybe you
should sell it”. I replied, “Oh not now, it is still going up!” He replied,
“maybe you should sell half of it”. Of course I knew better than my father and
ignored this advice. Within six months the stock was worth just a little over
what I had paid for it. I can still hear his words so clearly.”
