When times are tough, some investors are likely to double their bets, meaning they will convince themselves that now is the perfect time to invest huge sums of money, because things cant get much worse.
Even casual readers of this column know we dont believe in market timing in any form, and that includes dollar cost averaging. When you have the money to invest, invest it is one of our most fundamental beliefs.
Here are a couple of others rules that have served in good times and bad:
Limit expenses. When it comes to financing your investments, every little bit helps. And fees and expenses can quickly add up to be more than a little bit. Now more than ever, make sure you are paying the least possible in transaction expenses.
Dont chase yesterday's winners. There is a reason that investments always come with the disclaimer "past performance is no guarantee of future results." Because its true. Last year's hot stock or No. 1 rated mutual fund can be this year's dog. In picking a stock or a mutual fund, you want to look for investments that have turned in a superior performance over an extended periodat least three, and preferably ten years or longer. There is no reason to switch out of a successful investment, as long as there are no changes in the factors that have produced those superior results. Besides, frequent trading in your taxable accounts can increase your tax burden.
