10 tricks for better investing(ZT)

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10 tricks for better investing

1. Take the global view

View Keep calm by using a spreadsheet that emphasizes your total net worth, not the changes in each holding. Before you buy a stock or mutual fund, check whether it overlaps what you already own - try the Instant X-Ray tool at Morningstar.com.

2. Hope for the best - but expect the worst
Being braced for disaster - by diversifying and learning market history - can help keep you from panicking. Every good investment performs badly some of the time. Intelligent investors stick with solid companies that hit rough patches.

3. Investigate, then invest
A stock is not just a price; it's a piece of a living corporate organism. Study the company's financial statements. Read a mutual fund's prospectus before you buy. If you want to hire a broker or financial planner, do a background check before you write a check.

4. Never say always

No matter how sure you are that an investment is a winner, don't put more than 10% of your portfolio in it. If you turn out to be right, you'll still make plenty of money, but if you turn out to be wrong, you'll be glad you kept most of your powder dry.

5. Know what you don't know

Don't believe you are already an expert. Compare stock and fund returns against the overall market and across different time periods. Ask what might make this investment go down; find out if the people marketing it to you have their own money in it.

6. The past is not a prologue

On Wall Street, what goes up must come down, and what goes way up usually comes down with a sickening crunch. Never buy a stock or mutual fund just because it has been going up. Intelligent investors buy low and sell high, not the other way around.

7. Weigh what they say

The easiest way to silence a market forecaster is to ask for the complete track record of all his or her predictions. If you can't get a complete list, don't listen. Before trying any strategy, gather objective evidence on the performance of others who have used it.

8. If it sounds too good to be true, it probably is

More precisely: If it sounds too good to be true, it absolutely is. Anyone who offers a high return at a low risk in a short time is probably a fraud. Anyone who listens is definitely a fool.

9. Costs are killers

Trading costs can eat up 1% of your money per year, while taxes and mutual fund fees can take another 1% to 2%. If middlemen take 3% to 5% of your money per year, they will get rich. If you want to get rich, comparison shop and trade at a snail's pace.

10. Eggs go splat

Never keep all your eggs in one basket. Spread your bets across U.S. and foreign stocks, bonds, and cash. No matter how much you like your job, don't put all your 401(k) into your company's stock; employees at Enron and WorldCom liked their company too.

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