Three Important Rules for Successful Investing

1) Understand the fees. The more fees the lower the returns. 1.25% or below is reasonable. 2 and 20 is egregious. a 20% performance fee is great for the manager. When the market changes like it did in 2008, the manager does not collect the performance fee but the investor paid them on the upside.

2). Transparency - Know what you own and understand the the risks especially with shadow banking products. Best to avoid them.

3) Liquidity- Avoid investments that you are locked into for many years. The economy and markets are constantly changing. What sounds good today might not be good in a few years as regulations, markets, and the economy changes.

You many decide to keep your best stock investments for years however they are liquid in the event the company falters- Remember no companies last for ever and new companies emerge.

Limited partnerships were the big sellers in the 80's. They violated all three of these rules. Most of them were doomed to fail on day 1. Real Estate and Oil/gas limited partnerships. The fees were enormous and the sponsors and firms made lots of money. Clients were not so lucky. For the whole story read Serpent on the Rock by Kurt Eichenwald. Fascinating reading. I lived through it first hand.

Today the industry is promoting alternative investments (Alts) . Most of them violate the three rules. History has a habit of repeating itself.

If you want a second opinion or have questions about investment strategies feel free to reach out. Have a great day

Photo of storm clouds over Fort Smith, Montana by Hal Tearse