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24 February, 2015

Top 10 Investment Guidelines

If you only read one article from our website on how to invest successfully make sure it is this one.  Many people believe, and are encouraged in that belief by media and active fund managers; you can make money from identifying companies which are better than the average, and which will out perform in the future.  The problem with this belief is that it doesn't stand up to inspection.  You have the same information as everyone else, and that information is already in the price of the company you buy.  A better company should already be more expensive when you buy it, negating any advantage you have in buying that better company.  When you look at long term performance it is true that some managers, and some investors get 'lucky' (or have a 'secret sauce', which is what most of them would have you believe) but when you analyse all the evidence it turns out that active managers rarely add more performance per unit of risk than the additional cost of that research over the longer term.  Here Jim Parker, Vice President at Dimensional Fund Advisers explains 10 key investment guidelines which aid in successful investing.  There is no rocket science here, but like most 'secrets of success' successful investing consists of doing a few simple things well.

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by John Stirling


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