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Make meaningful improvements to your finances every week.

investor_commandments

The Average Investor’s Commandments

There are some rules, or commandments, that all investors should live by. We’ll discuss those ten commandments and explain the importance of each one.

1.  Think Long Term. You need to be in the market for the long con.  Put your money in and leave it alone.  You are not a day trader.

2.  Invest What You Can Afford. Don’t have so much money in the market that you have to pull it out to pay bills.  The constant in and out of the market is detrimental to long term gains.

3.  Buy What You Believe In.  If you have an interest, tech, music, you probably know a lot about brands within those interests.  That makes them good companies to invest in for you because you already have a lot of knowledge about the company.

4.  Do Your Own Research.  Matt bought Sirius stock because some guy told him to.  He didn’t do any research and lost money.  You have to put in some due diligence before buying stock.

5.  Set It And Forget It. Constantly checking your numbers does not make them go up.  Get your process in place and leave it alone.

6. Consistently Contribute.  If you are consistently putting money into the market, you are dollar cost averaging which means over time, you will mirror the market.  The market makes on average a 7% return.

7.  Be Fearful When Others Are Greedy.  When people are buying like mad, you should sit it out.

8.  Be Greedy When Others Are Fearful.  When everyone else is selling, buy, buy, buy!

9.  Find And Remove Frivolous Fees.  401K’s tend to have high fees, sometimes more than 1%.  Over thirty years that means 25% of the money you could have made goes to fees.  Do some research and find a fund with the lowest fee.

10.  Diversify.  If it can fail, it will fail so you need to spread out your risk.

Show Notes

average-investor-commandments

Vanguard:  A low fee fund.

Mint:  The easy way to track your money.

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<a href="http://www.listenmoneymatters.com/introduction-simple-investing/" target="_blank"><img alt="The Average Investor’s Commandments" src="https://www.listenmoneymatters.com/wp-content/uploads/2014/03/average-investor-commandments.png" width="640" /></a>

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  • Ron

    Nice Infographic! Simple, yet very informative. I just started a betterment account last week. I started with just $50 and plan to put $100 each month into it. I love their interface and the set it and forget it aspect. Makes investing not as daunting and intimidating.

    I’m still catching up on your podcasts (ep 11 i believe) but can’t wait to listen to this one and see what beers you guys are drinking!

    Cheers!

    • Matt Giovanisci

      Thanks, Ron! I agree, Betterment is awesome. The interface alone! Makes noobs like me take to investing much quicker.

      Truthfully, I haven’t been drinking beer on the podcast recently. I need to get back into it :-)

  • Lennie

    This was a great podcast! I love topics on investing for beginners. There’s so much to learn and this topic was very helpful. To add to the conversation about why save a lot now…I think there’s a more profound lesson to be learned in saving. There’s an empowerment that comes when you are working towards financial independence. When you buy less you begin to believe that you have ‘enough’ and that your life is plentiful so you begin to realize that you need less. I’ve always thought personal finance goes in line with personal development. Setting aside money and/or spending less allows you to preserve capital and allows you to focus on earning more which stirs your creativity – you’d rather build or create things – and not ‘consume’ things. So that, and of course keeping in mind to live in the present and enjoy the things you can.

    I also love the infographic!

    • Lennie, thanks for the compliment on the podcast. Don’t forget to leave a review on iTunes so we can reach and help other people. Those little things mean the world to us!

      I absolutely agree with you on the more profound lesson in saving. I view financial independence as freedom. If I hate my boss I can quit, if I want to move, I can. Vacation? Absolutely!

      Also, I definitely resonate with needing less through understanding “enough”. I can also agree that it stirs creativity, hence this site and our podcast ;)

      Thanks for listening and commenting! Props go to Matt for the beautiful images everywhere (infographic included), he’s a pro at making things visually delightful.