Monday, November 24, 1997
In So Many
Words
by Jerry Thomas
(TMF Cheeze)
(A reader asked me a few weeks ago to define the principles of Foolishness as briefly as possible. This was my reply.)
The Foolish Philosophy, like Fooldom itself, is simple. If that sounds self-deprecating, it's meant to be. In a few lines, it goes something like this:
1. Educate yourself. Do your own research. Don't rely on your broker or a mutual fund manager or the Wall Street Wise to make your investment decisions for you. Take charge of your own financial future. You have advantages that give you an edge over the professionals; use them.
2. Invest in quality companies for the extreme long term. Don't try to time the market; you can't. Buy based on fundamental value rather than momentum or a hot tip or the nifty trapezoidal flywheel pattern on the stock chart.
3. Don't overweight your portfolio in small caps. Ground your assets with ample holdings in large, stable American companies, using either a stock index fund or some variation on the Beating the Dow approach. When solid research shows a high potential for strong growth in selected smaller-cap stocks, invest in them if you are comfortable with the volatility. Short stocks that are trading well above their proper valuations.
4. Take the blame when things go wrong. Take the credit when things go right. But never assume you know what the market will do next. Realize that only a very unlikely cataclysm will prevent corporate profits or the American economy from growing substantially over the decades to come.
5. Get wired. Share information. Pool your knowledge and resources with your compatriots online. Teach the novice while learning from the veteran. Join the information revolution.
6. Have fun. Make friends. Enjoy the process. Don't sweat the dips. Sleep soundly, eat right, get plenty of exercise, and don't let stock market concerns consume you. Take nothing seriously, not even your profits.
7. Remember that the best time horizon for your investment plan is one that encompasses your entire lifetime.
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