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Jim’s 18 Commandments of Investing

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Why do you invest … hopefully to make money.

Why money … well it can help you achieve goals in life and provide you with a sense of security and freedom.

What makes some investors better than others? Sometimes it just to have a better plan.

Here is my list of “Commandments” to help you achieve your goals.

  1. Understand your motivation, it will change with age! Freedom, Security …. Fear? 
  1. Have a 4-bucket strategy, Taxable, IRA/410K, Roth, bank account. Put everything in the right bucket. Beware of sitting on too much cash.
  1. Justify every investment is it a trade, investment or cash generator?
  1. Let the winner run, until they aren’t winners! Taking money off the table …. why?
  1. If you don’t understand it, don’t buy it! People put Muni bonds in an IRA, or buy annuities …..
  1. “They” say you need to rebalance? Sell the winners … in a taxable account, why?
  1. Stay out of China, EM and foreign stocks, S&P is already diversified, 40% revenue outside US. Same with Penny stocks, gold, crypto, “value” and “small cap”
  1. When in doubt just buy 50/50 S&P 500, NASDAQ 100
  1. Don’t fund your company 401K beyond the company match
  1. Bond funds lose out to actual bonds. Beware of bonds in a taxable acct, tax issues
  1. Understand the Rule of 72 and the difference in price vs cash return
  1. Be tax smart, all the time. Give or gift kids/church/charity money, make it your most highly appreciated stock, NOT cash! Charitable/church count towards your RMD!
  1. Beware of “standards” like 60/40 , 70/30 etc. Bonds can be “bond surrogates” too.
  1. IRA & 401K’s are great, UNTIL you need them, huge tax issue!
  1. Best places for your next dollar of investment, in this order- Roth, taxable, 401K/IRA
  1. In our lifetime, large cap tech stocks, selective chip stocks are a must own. Don’t fight momentum
  1. If you have substantial assets you need a Trust to front-end your will.
  1. Over the last 28 years Target Dated Funds have been a failed experiment, grossly underperformed markets including 60/40 portfolio’s. It’s reported that approx 40% of company sponsored 401k plans are now Target Dated.

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