- Diversify widely. Limit single stock to 5% of my portfolio and single sector to 25% of my portfolio.
- Buy with plan to hold forever.
- Avoid options, excessive margins, shorting stocks, forex, futures, commodities, hedge funds, actively managed mutual funds, penny stocks, and leveraged and inverse ETFs.
- Max out my tax-deferred retirement account contribution annually.
- Max out my Roth IRA contribution annually.
- Stay the course in no-fee direct share purchase plans (DSPP) and loyal3 monthly dollar cost averaging program, currently $3500/month spread over 24 stocks. Overweight higher quality stocks and plans offering discount (NNN, YORW).
- For index funds such as VWO, time the market using Shiller PE Buy at 15, Sell at 24 with 6% retraction rule.
- Keep cash below 5%, to minimize cash drag, unless all markets are vastly overvalued.
- For potential new buys, focus on downside risk. Look at the historic price chart. Look at 10-year ratios and EPS. Does the company consistently have return on equity at least 15%, low debt, increasing earnings-per-share and dividends? Read its recent 10-K and other filings. Is it better than just adding to DSP/loyal3 or to a low-cost index fund?
- If a potential new buy passes all criteria above, start low and go slow.
- Keep costs low. Favor low or no yield stocks, foreign (non-UK or German) dividend stocks, and index funds in taxable accounts.
- Keep alternative investments, such as P2P loans, gold, private equity, under 5% of my portfolio, for such will underperform stocks over the long term.
- Only buy bonds when treasury bond yield is at least double stocks' earnings yield. For example, if stocks have PE = 20, buy bonds if the interest rate is at least 10%. Use PE of lowest among US, EAFE, and EM.
- Sell to harvest losses, to admit my mistake due to lack of research or deteriorated fundamentals, or as part of value averaging.
Last Updated: 1 Jan 2017
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