Friday, January 14, 2011

Investing rules

Talking of investing rules, I must admit that my 401k at the moment is in a state of anarchy. In this post by Cullen Roche on The Pragmatic Capitalist I read today, there are five good rules, listed at the end, that I really should implement.  Let's make that my goal.  The rules, in brief, are:

1) Stay flexible, admit your mistakes, cut your losers loose.
2) Seek non-correlated asset classes for true diversification.
3) Don't be emotionally biased.
4) Never stop learning.
5) Create your rules and follow them like a robot.

This is my assessment of where I am now with regards to these rules:

1) I am in the process of admitting my recent mistakes, but not quite there yet.
2) There's not much choice in my 401k. It's basically junk bonds, investment grade bonds, an S&P 500-indexed fund, a Russell 2000-indexed fund, and some expensive international equity funds.
3) I am definitely a sinner of emotionally biased decisions, because I don't have rules.
4) Working on that...
5) This should be the next thing I do. Look at my choices, define my strategy, and implement it.

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