Took this from the X-Factor report this week – good stuff to remember.
“This is why it is always important to remember and follow Richard Bernstein’s 10 Investment Lessons. I have highlighted the most important lessons for you.
1. Because most investors ignore income opportunities, income may be more important than are capital gains.
2. Most stock market indicators have never actually been tested. Most don’t work.
3. Most investors’ time horizons are much too short. Statistics indicate that day trading is largely based on luck.
4. Bull markets are made of risk aversion and undervalued assets. They are not made of cheering and a rush to buy.
5. Diversification doesn’t depend on the number of asset classes in a portfolio. Rather, it depends on the correlations between the asset classes in a portfolio.
6. Balance sheets are generally more important than are income or cash flow statements.
7. Investors should focus strongly on GAAP accounting, and should pay little attention to “pro forma” or “unaudited” financial statements. (i.e. operating earnings)
8. Investors should be providers of scarce capital. Return on capital is typically highest where capital is scarce.
9. Investors should research financial history as much as possible.
10. Leverage gives the illusion of wealth. Saving is wealth.
These lessons tie hand in hand with (The Street Talk Advisors) our basic tenants of investing
1. Every Bull market is followed by a Bear market.
2. Buy & Hold is fine during a secular bull market; it is ruinous during a secular bear market;
3. Returns are a function of Risk: The greater return you seek, the more risk you must be willing to accept;
4. “Risk” as it is defined means that sometimes, you lose. Big.
5. Valuation matters a great deal;
6. The business cycle still exists, and recessions will occur regularly;
7. Markets are subject to bouts of emotional extremes. They are after all, just crowds of humans, where at times logic does not prevail.
8. Capital preservation is just as important as performance. Returns become irrelevant if during the inevitable downturn you lose all your money.
9. Extrapolating the current trend to infinity (or zero) is foolhardy;
10. Politics and investing make for terrible bedfellows.
Another of their writers also defined those of us looking for retirement but not finding it… with:
“Are You A Member Of The Sandwich Generation?
Whether you suffer from Kinphobia, Ohnosis or Finertia today – you will remain a member of the Sandwich Generation IF you are between the ages of 52 and 58.
That’s right. Whether you fear having to use your retirement savings to support members of your own family (kinphobia) or it dawned on you that you waited too long to begin investing for retirement (ohnosis) or you presently feel paralyzed by overwhelming and/or confusing financial information that seems contradictory (finertia), one thing is certain: you are uniquely different than the generations that have come before you. Of the 28 million Americans aged 52 to 58 – your income has to produce financial assistance to you, your parents, as well as, your own children and perhaps even grandchildren.”
Man this is good stuff this week…