Investing Principles

The start of a new year is a good time to step back from the detail of your investing activities and consider whether your big-picture objectives are being met. Whether you're putting together a personalized long-term investing plan for the first time or have had a plan in place for years, it's worth quickly reviewing these core principles. As the seasons of life change and events influence your financial condition, it's appropriate to review and perhaps tweak your long-term approach. This guide will help you with this task.

The past few years have been scary for many stock investors. It's easy to question whether putting money into stocks is a good idea when markets are lower now than they were five years ago. Here we review how an investor would have fared starting an investment program just as the “Great Recession” was beginning in late 2006. We think you'll be encouraged when you see how the powerful combination of dollar-cost-averaging and SMI's Upgrading strategy have successfully counteracted even those worst of market conditions.

There's a lot to like about indexing as an investment strategy. But there are some downsides and issues for investors to be aware of as well.

With the markets unsettled and world events worrisome, many investors are having a tough time remaining optimistic about the long-term success of their retirement planning strategies. This article, by respected Christian teacher and financial planner Ron Blue, reminds us that uncertainties are nothing new. There are always economic or political negatives that can distract us from our intended course. In this antidote to fear, Ron explains how to stay focused and he offers suggestions on how to build a strategy based on biblical truths rather than secular myths.

Successful investing can be tough. Not only do you need to know what to do, but you have to actually do it, often at times when everything within you is screaming to do the opposite. That's why SMI tries to create strategies that minimize the internal conflict between knowing and doing. Consider these seven ways SMI's investing strategies make it easy for you to do the right thing.

The market has been flat for the past 11 years. It's tough accumulating investment gains in that type of environment, but it can still be done. We discuss two key investing tools, which when combined, have proven a potent combination.

Market corrections are almost always very unpleasant emotionally for investors. The eight keys highlighted here can help you remain calm even in the midst of stomach-churning stock declines.

"Behavioral economists" have been studying how potential outcomes — such as the likelihood of gains or losses — affect people's attitudes toward risk. Investors often misperceive risk, leading them to make decisions that are not in their best long-term interest. Our August cover article will reveal the tricks your mind plays on you when evaluating financial situations, so that you can make better investment and spending decisions.

SMI's Just-the-Basics and Upgrading core strategies tell you which funds to invest in — but two questions remain: How often should you invest? And how much should you invest at a time? Here's a simple answer.

SMI's Upgrading strategy provides clear-cut buying and selling guidelines that protect investors from their worst investing enemy — themselves. Most readers do well when they "follow the plan," but unfortunately during severe bear markets many investors toss their plan aside. So our cover story this month offers a new set of allocation suggestions for those times when the bear is on the prowl. This "emotional escape valve" should help you stick with Upgrading through the worst of times.

Investing decisions normally can't be made with mathematical certainty. That makes investing more art than science. Even so, there is one key rule to always keep in mind.

In May 2009, SMI published a cover article on the growing risk of inflation. A few months later, we presented a cover story on reasons to consider adding gold to your portfolio, and we followed it up with a third article on the practical aspects of buying gold. Readers who acted on the information presented in these articles have enjoyed handsome profits! But many who didn't act may be wondering if it's too late. This month, we review the pros and cons of investing in gold now.

Many investors exhaust themselves trying to beat the market. They devour financial publications, watch the 24-7 business channels, and act quickly on breaking news. Happily, there's a more relaxing path to winning the investing game. It involves not trying to win at all.

You can be a successful long-term investor simply by using a solid core strategy, such as our Just-the-Basics or Upgrading approaches. But you may be able to smooth out your investing journey with supporting strategies that make it more likely that you'll always own something that's performing well.

Want higher returns with less risk? Sure you do. Strategic diversification is the key — as a quick review of the past 15 years makes abundantly clear.

SMI's "Bear Alert" indicator recently triggered, meaning that a bear market appears likely (the indicator has been accurate 11 out of the 12 times it has sounded in the past 50 years). How should you respond to a possible market reversal? Do you need to respond at all? The answer depends on several factors. This month, we discuss these factors — and help you work through an objective process for making a "sound mind" decision about your investing strategy.

Your most important long-term investing decision isn't choosing which specific stocks or mutual funds to buy. Rather, it's deciding how much of your portfolio to invest in stocks vs. fixed-income (typically bonds). William Bernstein explains why this is the case in this month's cover story — an excerpt from his recent book, The Investor's Manifesto. He also offers a framework to help you make this key decision, based on how you reacted to the 2007-2009 bear market.

Are your investing decisions primarily driven by outside influences? Or do you make them based on a predetermined plan stemming from your unique situation? Here's a four-point checklist based on "inside-out" thinking to help evaluate your investing options.

Without a plan, it's easy to be blown about by the current emotions of the market. That's hardly a formula for long-term success.

Plenty of parents have made these common mistakes. There's no reason for you to make them too.

Could hyperinflation ever take hold the U.S.? Until recently, it's been difficult to imagine such a scenario. But given the massive amount of money being pumped into the economy and the clear spending ambitions of the president and congressional leaders, we can no longer rule out the possibility. For investors, preparation for a potential surge in inflation begins by understanding the nature of money, and why tangible assets such as gold offer a reliable store of value.

If rapid inflation is in our future, as some economists predict, how can you protect the value of your investments? Historically, investors have turned to assets that have proven to be reliable stores of value due to their physical attributes. Gold is one popular example of these sorts of "tangible" assets. This month, we look at five ways to invest in this precious metal, including gold coins, bars, and "digital gold currency."

Most of us don't have the stomach for a lot of volatility in our stock investing. Fortunately, there's a way to smooth out the ride.

The Madoff scandal has many investors rightly wondering, "Can I really trust the people handling my money?"

The "right" investment choices are the ones that have a high probability of getting you: (1) where you want to go, (2) when you want to get there.

At a time when investors are desperate for advice, the approach of an unassuming man from Omaha (who also happens to be one of the world's most successful investors) is worth heeding.

Generations of readers have discovered the secrets of building wealth from the wise teacher Arkad, Babylon's richest man — as imagined by George S. Clason in his classic 1926 book.

The way you divide your portfolio between stocks and bonds has a bigger impact on your eventual returns than any other single decision. Has the difficult first half of 2008 driven you out of stocks? Or are you persevering, trusting the traditional superiority of stocks will once again reassert itself? In this article, we look at historical patterns and how they can be used to guide your portfolio allocations as you plan for retirement.

As we survey the massive damage inflicted by the financial tsunami of 2008, one thing is clear: biblical financial principles offered significant protection to those who've been living by them.

One of the most important attributes for an investor to develop is the ability to think long-term. When the market corrects, as it has recently, are you ready to take advantage? Or are you part of the fearful herd asking each other all the wrong questions?

Knowing when to sell your mutual funds is just as important as buying good funds in the first place. There are four specific criteria that tell you it's time to sell. Unfortunately, even when investors understand the theory of why they should sell, too often they still fail to act — because of fear, lack of confidence, or simple inattention. To encourage a tough-minded look at your current holdings, we've studied thousands of funds and present a "Laggards List" of more than 950 that should be replaced without delay.

For the benefit of newcomers, we offer an explanation of SMI's highly successful Upgrading strategy — and why it leads to superior returns.

Relentlessly rising oil prices. Inflationary pressures building. Slow economic growth. And a stock market stuck in neutral. To veteran investors, it's starting to feel like the 1970s again. What should you do if the market repeats its 1966-1982 experience and stays stuck in the same range for several more years? Two simple questions can reveal the answer.

Making investment decisions based on an emotional response to market events could undermine your long-term gains. Here's one way to keep your emotions in check.

Austin shares four things that encourage and comfort him when periods of distressing stock market losses suddenly arrive.

Putting this market ideal into practice is tough on the emotions, but ultimately rewarding for your pocketbook

Load vs. No-Load. Class A, B, C, R, Y, Z…what does all this mean? Selecting mutual funds can be confusing, but by learning just a few key principles, you can cut through the maze of confusion and find exactly the right funds for you. We deliver the basics you need to know about mutual fund types and share classes.

One feature brokers promote to unwitting customers is access to the supposedly valuable research their firm's analysts produce. But is brokerage research actually worth much at all? Come along for a peek behind Wall Street's curtain — a place where "Buy" sometimes actually means "Sell".

Noted investor Charles Carlson once wrote that long-term investors get rich during bear markets — they just don't realize it until later. Why is it that when fear runs rampant through the markets, some investors panic while others make their fortunes? Jason Zweig's excellent new book on "neuroeconomics" explains the tricks our brain plays on us when it comes to finances and the emotions they inspire. In this article, he helps us understand that most dangerous of investing enemies — fear.

Stock investors have a number of helpful tools to measure risk, like standard deviation and SMI's relative risk scores. Similar tools exist for bond investors as well. We examine one of the best and explain how to apply it when selecting bond funds for your portfolio.

Have you ever considered what keeps our complex economy operating efficiently, automatically sorting out competing demands for limited resources and directing them to where they are most needed at any given time? It's the system of free market pricing. This brilliantly simple explanation of prices and their function will help you realistically evaluate the many proposals for government intervention in the free market that we are likely to hear this election season.