11 Principles For Successful Investing:

1. Plan On Living a Long Time. There is a greater than 50% chance that at least one of a 65 year old couple will still be alive at age 90. That’s the average—the more affluent can expect to live longer.

2. Cash Isn’t Always King. The corrosive effect of inflation over the long term will destroy the purchasing power of your cash holdings. Even at only 2%, inflation will reduce your cash wealth by over 55% during retirement.

3. Invest Mainly in Equities (Shares) To Build and Maintain Your Wealth.

Cash and bonds are for short-term liquidity needs only.

4. Short Term Volatility Is Less Important Than Long Term Growth.

The difference in return between equities, bonds and cash determines your financial security and independence.

5. Stay Invested in Equities For The Long Term. There has never been a 20-year period that provided negative returns for a global equity portfolio.

And you’re always investing long-term, even after retirement.

6. Harness the Power of Compounding and Dividend Reinvesting. Start now, invest as much as you can afford, and reinvest the returns.

This is the secret sauce of investment success.

7. Volatility is Normal. Don’t Let It Derail You. The FTSE falls on average by 15.3% during each year. And yet annual returns are positive in most years.

Expect volatility; it’s a feature, not a bug.

8. Avoid Emotional Biases and Just Keep Investing.

Many investors sell out during a temporary market downturn, and so miss the recovery when it comes. And it always comes.

Investing well is more about psychology than it is maths.

9. Markets Usually Enjoy Strong Returns After a 25% Drawdown. Every few years, the markets fall by 25% or more. However they often bounce back within 12 months.

You Have To Stay Invested To Capture The Return.

10. Diversification Works. Trying to predict which asset class or sector will outperform next year is a mug’s game. This ‘patchwork quilt’ shows the best and worst performers each year - no one has the ability to predict this in advance.

Diversification is the solution.

11. Don’t Be An Average Investor. Growth assets like equities provide returns of 8 - 10% a year on average.

However, the average investor return is 2.9%.

This is due to poor investor behaviour and attempting to time the market by buying and selling at the wrong times.

Summary

• Invest for the Long term
• Mostly in Equities
• Diversify Globally
• Stay Invested During the Short-Term Declines

Enjoy the journey...

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