Another set of instructive rules for investors, this one from Morgan Housel:

1. Nine out of 10 people in finance don’t have your best interest at heart.
2. Don’t try to predict the future.
3. Saving can be more important than investing.
4. Tune out the majority of news.
5. Emotional intelligence is more important than classroom intelligence.
6. Talk about your money.
7. Most financial problems are caused by debt.
8. Forget about past performance.
9. The perfect investment doesn’t exist.

 

 

Source:
9 Financial Rules You Should Never Forget
Morgan Housel
October 14, 2012
http://www.fool.com/investing/general/2012/10/14/9-financial-rules-you-should-never-forget.aspx

Category: Investing, Rules

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12 Responses to “Morgan Housel’s 9 Financial Rules”

  1. peacock says:

    I have thought of a rule and am testing to see if it has value.

    Rule: Listen to people who have a track successful track record making money and accurate predictions. Ignore opinions from people who have a mediocre track record.

  2. wally says:

    So if you don’t try to predict the future and if you don’t go by past performance, what do you do?
    Throw your money around? Buy booze? go to Vegas? Do random stuff?
    There’s not much point to that advice.

  3. rd says:

    I think he is being optimistic about the 9 of 10.

  4. cfischer says:

    Not to pick on or pigeonhole Morgan, because I like the above list – but per his Bio, he has 4 years old work experience, all of which is writing for Motley Fool..

  5. ToNYC says:

    “1. Nine out of 10 people in finance don’t have your best interest at heart.”

    To be at at all fair to this statement, I’m obliged to say that 10 out of 10 people don’t have your best interest at heart and that should be completely obvious before you start speculating beyond a savings account under 100K at an FDIC institution. What should also be obvious is questioning the utility of the rest of the list.
    What you can predict is the inaccuracy of historical reporting that most use for feedstock in supposedly thinking of possible outcomes.

  6. murrayv says:

    Peacock, the last time I put money with a professional money manager, after much research I chose the best one I could find with a successful track record from about 1980 through 2006. They completely blew the 2008 downturn, in spite of the fact that I gave them a warning that they were ignoring one of their own concepts. Past performance is no guide to future results. Murray

  7. theexpertisin says:

    Here’s #10:

    Marry well, the first and only time.

  8. howardoark says:

    Rule: Listen to people who have a track successful track record making money and accurate predictions. Ignore opinions from people who have a mediocre track record.

    you will be a victim of survivorship bias

    emotional intelligence is indeed important, but it can be taught unlike actual intelligence (just follow Dale Carnegie’s advice) so I would put a spectrum on the two and try to find a sweet spot.

    I would say that Microsoft circa 1986 was a perfect investment

  9. BennyProfane says:

    @wally

    The answer to that is #3 and #7

  10. bonzo says:

    My rule #1: “each dollar of positive alpha must be matched by a dollar of negative alpha”.
    Corollary: if you choose to deviate from a purely passive strategy, in order to generate positive alpha, then you must first identify someone who will produce the necessary negative alpha. You can’t just say “dumb money” and leave it at that. You must be clear as to why the dumb money can be expected to be dumb in the future with respect to your smart-money strategy. Furthermore, you must explain why not enough other people are taking advantage of this dumb money to dilute the potential alpha to be gained down to nothing. In short, you need to identify your “edge”. If you don’t have a good idea of what your edge is, and why your edge is sustainable, then you’d better go passive lest you become the dumb money. “If you’re playing poker with professionals and don’t know who the patsy at the table is, then the patsy is you”–Warren Buffett.

  11. call me ahab says:

    “Most financial problems are caused by debt.”

    Of course it doesn’t stop countries from leveraging up- easier than saying your broke I guess

  12. Irwin Fletcher says:

    I learned #1 on the list the hard way.