October 24, 2008
Some folks from The Motley Fool interviewed me recently. You can see their article, along with my generic investment advice here, which I first published several years ago:
The power of the nine items is that they are in the order in which you should do them. That doesn’t sound like a big deal, but if you are new to investing, you wouldn’t know where to start, and you’d have a hard time finding that answer anywhere else. You would probably end up letting some professional manager handle your money while converting much of your gains into his fees. The nine point list solves that problem.
The other power of the list is that it excludes all of the investment concepts that you shouldn’t be messing with. Notice that there are no derivatives, or options, or anything exotic.
Obviously every investor is in a different situation, and I wouldn’t expect many people to follow the nine points exactly. But I think it helps to know what the standard model looks like before you decide where to make your own exceptions.
All bets are off for the moment, obviously. The big question this week is which one of your neighbors you should eat first when things get bad. And of course I expect some sort of zombie problem. But in normal times, the nine point list is useful.
Arguably, all of our economic problems stem from too many people not following the nine point investment list.
Astute observers will point out that anyone who had a lot of money in stocks, as the model suggests, would have gotten hammered this year. That’s true, but one of the obvious exceptions to the model is that if you think you need to withdraw your money in the next five years, you should reduce your stock holdings to avoid the risk of just such a downturn.