Took this from the X-Factor report this week – good stuff to remember.<\/p>\n
“This is why it is always important to remember and follow Richard Bernstein\u2019s 10 Investment Lessons. I have highlighted the most important lessons for you. These lessons tie hand<\/strong> in hand<\/strong> with (The Street Talk Advisors) our basic tenants of investing<\/p>\n 1. Every Bull market<\/strong> is followed by a Bear market<\/strong>. Another of their writers also defined those of us looking for retirement but not finding it… with:<\/p>\n
\n1. Because most investors<\/strong> ignore income opportunities, income may be more important than are capital<\/strong> gains.
\n2. Most stock market<\/strong> indicators have never actually been tested. Most don\u2019t work.
\n3. Most investors\u2019 time horizons are much too short. Statistics indicate that day<\/strong> trading is largely based on luck.
\n4. Bull markets are made of risk<\/strong> aversion and undervalued assets. They are not made of cheering and a rush to buy.
\n5. Diversification doesn\u2019t depend on the number of asset classes in a portfolio<\/strong>. Rather, it depends on the correlations between the asset classes in a portfolio<\/strong>.
\n6. Balance sheets are generally more important than are income or cash flow statements.
\n7. Investors should focus strongly on GAAP accounting, and should pay little attention to \u201cpro forma\u201d or \u201cunaudited\u201d financial<\/strong> statements. (i.e. operating earnings)
\n8. Investors should be providers of scarce capital<\/strong>. Return on capital<\/strong> is typically highest where capital<\/strong> is scarce.
\n9. Investors should research financial<\/strong> history as much as possible.
\n10. Leverage gives the illusion of wealth. Saving is wealth.<\/p>\n
\n2. Buy & Hold is fine during a secular bull market; it is ruinous during a secular bear market;
\n3. Returns are a function of Risk: The greater return<\/strong> you seek, the more risk<\/strong> you must be willing to accept;
\n4. \u201cRisk\u201d as it is defined means that sometimes, you lose. Big.
\n5. Valuation matters a great deal;
\n6. The business cycle still exists, and recessions will occur regularly;
\n7. Markets are subject to bouts of emotional extremes. They are after all, just crowds of humans, where at times logic does not prevail.
\n8. Capital preservation is just as important as performance. Returns become irrelevant if during the inevitable downturn you lose all your money.
\n9. Extrapolating the current trend to infinity (or zero) is foolhardy;
\n10. Politics and investing make for terrible bedfellows.<\/p>\n