Ten Principles for the Mutual Fund Investor

  1. Investing is not nearly as difficult as it looks – Successful investing involves doing just a few things right and avoiding serious mistakes.
  2. Investing is not risky – In life, if you don’t risk anything, you risk everything. Nothing ventured, Nothing gained!
  3. Time accelerates the magic of compounding – Start investing early. Give yourself the benefit of all the time you possibly can.
  4. Simplicity rules – When there are multiple solutions to a problem, choose the simplest one.
  5. Diversify – Mutual Funds provide diversification. Don’t put all your eggs in one basket (stocks).
  6. The three pillars of Investing – Risk, Return & Expenses – You would have heard, “Higher Risk, Higher Return” but what also needs to be kept in mind is “Higher Expenses, Lower returns!”.
  7. Mean Reversion is the iron rule of the financial markets – No fund can consistently sustain exceptional high relative returns. Regression to the mean is inevitable.
  8. Don’t get swayed by the markets – Never assume a cyclical trend (bull or bear) will last forever. None does.
  9. Hear what market says about others, not what others say about the market – Market knows everything, the financial markets reflect the knowledge, the hopes, the fears, even the greed of all investors everywhere. Seldom would you know anything that the market doesn’t know.
  10. Think Long term – Do not let transitory changes in the stock market alter your investment program. The best rule is – “Stay the course, this too shall pass!”

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