The 3 Big Rules of Investing, Ep #249

Best In Wealth Podcast

I believe there are three rules that every family steward should follow when it comes to investing. In theory, these rules are “easy” to follow—but living by them is not. Secondly, these rules won’t surprise you. That doesn’t make them any less important. So in this episode of Best in Wealth, I’ll share what each rule is and you’ll discover why you have to follow them. [bctt tweet="📣 What are my 3 BIGGEST rules for investing? Find out in episode #249 of Best in Wealth! #investing #PersonalFinance #FinancialPlanning #WealthManagement" username=""]

Outline of This Episode

• [1:06] The 3 rules for dating my daughters
• [5:31] Rule #1: Do NOT try to time the market
• [11:12] Rule #2: Do NOT focus on the headlines
• [13:53] Rule #3: Do NOT chase past performance

Rule #1: Do NOT try to time the market

Whether it’s a bad day in the stock market or upcoming elections, it can be easy to let your emotions get to you and think, “Maybe I should get out of the market right now.” It’s easy to sell everything and get your money out. However, it’s far harder to decide when to put the money back in. No one ever thinks about the second half of the equation. Do you have an investing philosophy? What’s your system? When will you get your money back in the market? The S&P 500 has been rolling. It was up 15% last quarter. Small Value was negative for the year. Wouldn’t it be tempting to take the money from your small value and move it into the S&P 500? But Small Value has done far better this quarter. You would’ve lost out on that money. John Bogle—The Founder of Vanguard—spent over 70 years on Wall Street. He’s famously known for saying, “I’ve never found anyone who can successfully time the market.” There’s a reason for that. [bctt tweet="🚨 Do NOT try to time the market. Why? Check out episode #249 of Best in Wealth for the answer. #investing #PersonalFinance #FinancialPlanning #WealthManagement" username=""]

Rule #2: Do NOT focus on the headlines

It’s too easy to become enamored with popular stocks that get media attention. For example, the Magnificent Seven has risen in popularity (Google, Apple, Facebook, etc.) for the last 10 years. They’ve done amazingly well in 2023 and 2024. However, once companies hit the “top 10,” their returns tend to decline. Just because you read a headline about a company doesn't mean it will perform better. What you’ve read about is already priced into the market. You must separate what you’re seeing on the news from your investment.

Rule #3: Do NOT chase past performance

You might be inclined to choose investments based on past returns. You expect top-ranked funds to continue to deliver their best performance. We see this time and time again with new investors. They don’t know where to start. The only information they have in front of them is past performance. So they choose what’s had the best performance recently. But research shows that most funds that are ranked in the top 25% don’t remain in the top 25% over the next five years. Only about 1-in-5 mutual funds stayed in the top-performing group. The lesson? A fund’s past performance offers limited insight into its future returns. As family stewards, how do we shift our focus? What do we want to do instead? Listen to hear my thoughts. [bctt tweet="📣 One of my biggest rules for investing: Do NOT chase past performance. Learn why in episode #249 of Best in Wealth! #investing #PersonalFinance #FinancialPlanning #WealthManagement" username=""]

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