18 simple rules

While looking around the waiting room during a recent visit to the doctor (don’t worry, nothing serious), I came to a conclusion that had more to do with my portfolio than my pancreas: Financial advice is a lot like medical advice.

In both cases, people place a much higher value on complex analysis than on simple guidance. Yet, in many cases, you only need the complicated advice if you've ignored the basic advice to begin with. Lung cancer treatments, for example, have become amazingly sophisticated. But for most people, they will never be as effective as two simple words: Don't smoke. 

A lot of investing advice is incredibly complex, too. But like medicine, most of what you need to know are common-sense rules that get overlooked or written off as too obvious. So, instead of flipping through the well-worn pages of old People magazines, I came up with 18 simple rules I try to follow. 

1. Change your mind as often as the facts change. 

2. Ignore people who refuse to change their minds when the facts change.

3. Read more books and fewer articles.

4. Read more history and fewer forecasts.

5. You have no obligation to have an opinion about anything. 

6. You have a strict obligation to not have an opinion about things you don't understand.

7. Judge investors by the quality of their arguments, not the performance of their most recent trade.

8. You're twice as biased as you think you are. (Four times if you disagree with that statement.)

9. Be careful when reading about how stupid investors can be... and not realizing you're reading about yourself. 

10. Emotional intelligence is more important than book intelligence.

11. The correlation between confidence and future regret is high.

12. Don't try to keep up with the Joneses. They're no happier than you are.

13. The most powerful way to have more money is to learn to live with less. You have complete control over your lifestyle.

14.  Big risks will always be disregarded; small risks, always blown out of proportion. 

15. You're only diversified when some of your investments perform worse than others. 

16. Admit when you're wrong.

17. Assume the worst, hope for the best, and accept reality.

18. Every five to seven years, people forget that the market crashes every five to seven years.

So there you have it: simple, straightforward advise that will cure your latest investing ailment. Everything else is details.

Have a great weekend,