Simple Wisdom

by Spencer Sherman & Brent Kessel

It happened again last week. I met a well educated investor (a Master's degree in finance) who knew better than to put all his eggs into one basket--but did anyway. He lost 30 years worth of accumulated savings and his residence.

I meet people regularly who invest in complicated and undiversified strategies and deals in the hopes of retiring early or beating the market. While most of these investors have a lot of formal financial education, it is common sense and bringing awareness to our fear and greed that creates financial success. If we all just followed these adages, we would eliminate investment stress, avoid cotastrophe, and most likely make more money:

Don't put all your eggs into one basket.

Invest for the long-term.

Diversify. (Unless it's a very diversified index mutual fund, put no more than 2%-5% of all your money into any one investment, one piece of real estate, one stock)

Start investing on an automatic monthly basis even if you're over your head in credit card and other debt. Start with $50 per month for example. Don't wait for your finances to improve--take advantage of the magic of compounding for a longer stretch of time by acting today rather than tomorrow.

Simple. And rarely followed. But if you want to be one of the few and NOT follow the herd, follow these rules and enjoy financial freedom.