The 10 Commandments for Individual Investors

Book Review: Winning the Loser’s Game: Timeless Strategies for Successful Investing by Charles D. Ellis

I recently completed one of the greatest books on investing, written by one of the most influential investors of all time. That book is Winning the Loser’s Game: Timeless Strategies for Successful Investing by Charles D. Ellis.

If you do a search for the best books on investing, Ellis’ Winning the Loser’s Game is always in the top 5. It’s a great, timeless classic on personal investing that is simple and concise. Ellis tells great, and often very funny, stories to convey his points, as well as compelling data to support his claims.

Charley Ellis lays out the most important investment lessons for individual investors. Those looking to save, invest and retire wealthy through diligent saving and investing in low cost index funds must read this book. He lays out the easy and successful ways to get rich (slowly) through proper investing. It is required reading for all my Millennial personal finance readers. Regardless of your investment knowledge, the sound money management skills laid out in this book are a must read for all audiences.

10 Commandments for Investors

One of my favorite parts of Winning the Loser’s Game: Timeless Strategies for Successful Investing by Charles D. Ellis is his 10 commandments for individual investors. Below are the 10 commandments for investors, which is a great guide for Millennial investors.

1) Save, save, save. Invest and save for your future happiness and financial security, as well as an education for your kids. This is the foundation of financial freedom and one day becoming financially independent to do whatever you want, whenever you want.

2) Stop speculating. The more you read up on investing the more you hear every reputable financial advisor insisting you only invest in low-cost index funds. Well some people just have to “play the market” to satisfy and emotional itch. If you do, try to limit yourself to 5% or less of your portfolio and be sure to track your performance carefully. You may stop “playing the market” faster than you think.

3) Don’t invest for tax purposes. Don’t believe in tax shelters or tax-loss harvesting. Don’t do anything in investing primarily for tax reasons. You absolutely should invest in a Roth IRA (or Traditional, but I strongly prefer Roth) and maximize contributions to your tax-sheltered 401(k) every single year. But, outside of these accounts, don’t overthink it.

4) Don’t view your home as an investment. A home is not a good financial investment and never was. But a home can certainly be a fine investment in your family’s future and happiness. Your goal should be buy a modest home that you can afford and that your family will love. Then, pay the mortgage off and live there forever. That’s when your house becomes a good investment.

5) Just say “no” to commodities. Dealing with commodities (oil, gold, silver, corn, livestock, etc.) is really only price conjecture. It is not investing because there is no economic efficiency.

6) Be very leery of stockbrokers and mutual fund salespeople. Their job is not to make you money, but to make money off you. Now not all stockbrokers and mutual fund salespeople are bad, but you must be very careful and watchful when dealing with one.

7) Don’t invest in new or “interesting” investments. Stick to the basics, total stock indices, REITs, emerging markets, etc.

8) Don’t invest in bonds just because you heard they are conservative and safe. Bond prices fluctuate nearly as much as stock prices do. And bonds are terrible against one major risk – inflation.

9) Come up with goals and write them down. And then stick to them. Write down your long-term investing goals (retirement and college), home payoff, retirement income and net worth goals. It’s best to review these goals annually to ensure you are on track.

10) Don’t trust your feelings. When you feel overjoyed, you’re probably in for a bruising. When you feel disenchanted, remember that it’s darkest just before dawn, so don’t take any action. Less is better when it comes to investment activity. Set it and forget, and keep investing.

Leave a Reply

Your email address will not be published. Required fields are marked *