Read Ten New Year’s resolutions for us irrational investors

January 9th, 2007 by Olav2 · No Comments

Some great advice from Paul Farrell on marketwatch that we should all take in.

Ten New Year’s resolutions for us irrational investors

Summary:

The market is unpredictable. Accept that you can’t time the market and buy (low cost) index funds for the long-haul. And of course, fund your retirement nest-egg!

My additions and comments are the indented lines and denoted [me:]

1. OK, say it out loud: ‘I am an irrational investor!’

Acceptance is the first step to recovery

2. Yes, I know I’m running a handicap race against Street pros

3. I will never again try to predict our unpredictable markets

4. Yes, I’ll be optimistic about my life, but not the market

5. I will focus on the long term and stop active trading

6. I resolve to live ‘below my means,’ saving 10% for retirement

To me, this is at least #2, not #6

7. I resolve to trust nothing I read in the media

This goes for more than just the financial media…

8. OK, I know my broker’s advice is always biased in his favor

9. I promise I will build a well-diversified portfolio

10. In 2007 and beyond, I will only buy no-load [me: LOW expense ratio] index funds [me: or ETFs]

If you just can’t make the switch to passive index investing, change the above to:

In 2007 and beyond, I will only buy no-load ~~index~~ low-expense ratio funds.