The Rules (Part 1)

What are the tools?

A couple days ago I said that we have the tools to be ready for the uncertain future that lies before us. Some have asked me what I meant by that.

The first rule to follow when you don’t know the future is to diversify. This is a rule as old as the Bible. When trouble hits, if you have your savings split up, some of your money will come through okay.

Second, be patient. It takes years to accumulate a sizable nest-egg. The only beneficiaries of get-rich-quick schemes are the sharks that sell them. When it comes to saving, you have a choice: get rich slowly, or get poor quickly.

Third, stay balanced. If part of your portfolio seems to be getting bigger than it should, don’t be afraid to trim that holding and put the money in an out-of-favor area. Investment fads come and go. By rebalancing, you can take advantage of this.

Finally, be skeptical. Ask for proof. If getting rich were simple, why aren’t more people doing it? But if the world’s going to end, why hasn’t it already? Reviewing history is humbling. If those folks muddled through, why shouldn’t we be able to?

Are these the only tools we’ll need for financial success? No. But like the homeowner with just duct tape and a set of pliers, they’re enough for a start. The rest we can pick up as we need them.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

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