Knight Kiplinger is the editor-in-chief and a columnist for Kiplinger’s Personal Finance, one of the “big three” money magazines. In the June issue, Kiplinger offered an investor’s manifesto, a list of twenty guiding principles for making smart investment decisions.
Kiplinger’s manifesto is a great list, effectively summarizing mainstream investment theory on a single page. I liked it so much that I obtained permission to reprint it in its entirety. Here are the twenty points in Knight Kiplinger’s investor’s manifesto:
- I am an investor. I do not trade my assets frequently. That’s speculation, not investing.
- I am also a saver, fueling my investments with continuous savings from current income.
- I know that every kind of asset entails risk — even cash, which can be eroded by inflation.
- I know that higher returns entail higher risk, in every kind of asset.
- I accept those risks, but I mitigate them by owning a diversity of assets.
- I regard my home as a place to live, not as an investment. It is not a substitute for retirement savings.
- I have an investment plan and a plan for asset allocation, in consultation with a financial adviser.
- I invest regular amounts every month, in both rising and falling markets. I know I cannot gauge market tops and bottoms. If I receive a windfall — a bonus, bequest or gift — I gradually feed it into my regular investment mix.
- I don’t pour more money into hot markets nor completely cash out of plunging markets.
- I spread my investments among several asset classes, in a mix fitting my age and risk tolerance.
- My share of bonds roughly equals my age. I will allocate to stocks a declining portion of my financial assets as I get older.
- I rebalance my portfolio every quarter. If the stock market plunges, pushing my stock allocation way below its target percentage, I sell bonds and use my cash to buy stocks.
- I force myself to sell high and buy low by periodic rebalancing — just what is temperamentally difficult for most investors to do.
- I know that stocks are risky in the short run, so I hold in equities no money for which I have a likely need in the next three years.
- But stocks are not too risky in the long run. They have outperformed all other commonly-traded assets over periods of 15 years and longer.
- Foreign stocks account for at least 15% of my stock allocation. I believe that developing economies will enjoy much higher growth than the U.S. in the decades ahead.
- I never borrow against my stocks. Margin calls could force me to sell good assets at a bad time.
- I stick with my game plan. I do not check the value of my investments every day or even every week.
- I try to keep my cool when other folks are losing theirs.
- I remind myself often: I am an investor.
Do you disagree with any of Kiplinger’s mantras? Are there others you’d add to the list? (For example, I might include: “I buy low-cost index funds. I know that over the long-term, indexing beats the returns offered by most other investment options.”) Do you hold a set of principles that guide your investment decisions?
In April, I shared a similar document from billionaire John Templeton, who described his 16 rules for investment success.
[Kiplinger's Personal Finance: An investor's manifesto, reprinted with permission]
GRS is committed to helping our readers save and achieve their financial goals. Savings interest rates may be low, but that is all the more reason to shop for the best rate. Find the highest savings interest rates and CD rates from Synchrony Bank, Ally Bank, GE Capital Bank, and more.