An Investor’s Manifesto, for Real Investors

I recently read an article from Kiplinger’s called An Investor’s Manifesto, which accurately summarizes several important investment pillars to follow.  Some of those ideas are in this post and I have added several of my own.

Diversification among different asset classes works well over the years and decades, but often quite poorly over weeks and months.  THIS is not “buy and hold” but buy, diversify/allocate and reallocate periodically over time.

Gold and Silver are the ultimate financial insurance because they carry no counterparty risk and have a 5,000 year track record.  Allocating 10%-15% of your portfolio to gold and silver bullion is a wise idea.    “Pundits” tell you gold is not an inflation hedge by comparing gold to the stock market? Not one stock in any of the averages has existed nearly as long as gold. (stop! And think about that)  Key Point: Gold is the ultimate hedge against fiat paper money, not the stock market, not commodities, but against central bank’s  mismanagement of their respective sovereign currency.  How so?  In 1971 when we were on the gold standard, it took $35 (USD) to buy 1 ounce of gold; today in 2010, it takes $1150 (USD) to buy that same 1 ounce of gold.

Being debt-free, allows me the freedom to dictate my relationship with money and have money work for me.

As an investor, I do not trade my investments frequently or act on emotions.

As a saver, I am able to add to my investments regularly from my current income.

I respect the theory of the Black Swan, which means that I can never fully see or be aware of every risk out there.  Therefore, I never speculate with more than 5%- 10% of my investment capital.

I know that every asset class involves risk, including cash and money markets.  Therefore, I properly hedge (diversify) my investments and do so among different currencies as well as into gold and silver.

I realize that higher returns entail higher risk.  Once an investment has outperformed (relatively – to other asset classes), risk increases.  This is also when most investors feel the most comfortable.

My home is my place to live. It is not a business that produces “widgets”.  Therefore, I should expect to see returns that track real income and not that of growth stocks.

I am a student of the market and personal finance. I seek a well rounded understanding of the world around me and don’t take anyone’s advice at face value.

My percentage allocation of fixed income and safer assets typically equals my age at a minimum.

I have an investment plan that includes regular monthly savings and allocation whereby I periodically review my investments and reallocate accordingly.

By periodic rebalancing, I force myself to sell high and buy low – which is the hardest thing for an investor to do.

I keep my emotions in check while others are losing theirs.

I never invest when my emotions too high or too low. Rather, I stick to my investment plan which is well thought out and logical.

I never act on an investment tip without doing my own due diligence.  I realize that 80% or more of investment tips are simply unfounded and biased.

I invest in the world markets because I realize that true diversification comes from outside my country’s borders and sovereign currency.

I never borrow against my stocks and go on margin.

I read this manifesto regularly and remind myself of that I am on track to achieve my own financial independence.

Related posts:

1. Invest In Yourself and a Closer Look at the Long Term
2. Purchasing Power of the US Dollar Since 1774
3. How to Invest for the Summer Months
4. What The Yield Curve Is Telling Us
5. Fixed Income Funds