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Three Rules of Investing

  1. Own Equities - Equities (Stocks) have historically outperformed Fixed Income (Bonds). They provide a risk premium that produces more returns for the investor over time, 100% of the time over a 20 year period. Dalbar, an industry research company who produces studies each year on investor behavior, has shown the average equity mutual fund is owned for only three years! 

    Source: Quantitative Analysis of Investor Behavior, 2014, DALBAR, Inc.

  2. Diversify Globally - Diversification is the ownership of equities and fixed income across an array of different sized companies, in a multitude of industries, all around the globe. In order to properly diversify and achieve optimum correlation between asset classes, a portfolio could consist of over 12,000 holdings.

  3. Rebalance - Rebalancing is the systematic process of buying low and selling high particular asset class holdings in order to maintain a stated portfolio allocation between those asset classes. So if equities have increased in value and fixed income decreased, it would make sense to sell a portion of equities and buy a portion of fixed income. The converse holds true. Most people do the opposite, they buy more of what's increasing in value and sell the decreasing asset class.


Equities may decline in value due to both real and perceived general market, economic, and industry conditions. All investments contain risk and may lose value.