There’s a lot of advice out there when it comes to investing your money. You have to do your research and make informed decisions when it comes to your money. Allow me to introduce the three rules of investing I follow that have brought me success.

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Investing can be difficult and complicated when it’s really not. For anyone just starting I definitely understand that there can be a lot to be intimidated by. “What do I invest in?” “Where do I invest?” “Is it safe to invest in stocks?” “What about bonds?” These are questions I’ve had to ask and research the answers to. And I’m sure you have thought about these same questions maybe more. My plan is to address some of these questions over this year and before I do that I want to lay out my three rules of investing I personally live by that I think you can benefit from.

Rule #1: I Do Not Invest In Single Stocks

You ever heard the phrase, “Don’t put all your eggs in one basket.” That’s what you essentially do when you invest in single stocks. Your money is better served at Vegas. At least you get a free drink while you lose your money to the house. Single stocks are simply not a good way to invest for any beginner or anyone who wants to build wealth. And Vegas is not a place to go make money.

I invest my money in mutual funds and more specifically low-cost index funds. I talk more about index funds here and why my investment portfolio is mainly built around index funds. For now, just know that you can invest in many different businesses through one index fund. This keeps your portfolio diverse and more stable than owning single stocks. Note: I also do not invest in currency, including cryptocurrency. The thousands of companies I invest in operate on capital and currency so there’s no need to invest in a bitcoin or Euro.

Rule #2: Know My Risk Tolerance For Where I Am

When you study the stock market you quickly find out that long-term investing has always yielded positive results. One of the most important decisions you can make when investing is how much of your portfolio will be allocated to stocks, bonds and other asset classes. Stocks obviously are more volatile, meaning up and down like a roller coaster that people below a certain height aren’t allowed to ride. General advice is the younger you are the more weighted to stocks your portfolio should be. As you age the more you can add bonds and other less volatile asset classes as you will likely want to keep your investment portfolio as stable as possible.

For me my risk tolerance is having 100% stocks right now. I am ok with the volatility this early during my accumulation years. In the future I honestly do not see myself having a portfolio with stocks taking up less than 60-80%. Who knows, maybe when I’m 70 or 80 I’ll be more inclined to be 50/50  between stocks and bonds. I’ll let you all know then at that time! For now, my 100% stock portfolio in my 401(k) is broken down to 75% US stocks and 25% international stocks. I’ll talk about this more in detail in a later post about index funds.

Rule #3: Never Panic, Stay The Course

There are very little guarantees in life. Death and taxes are pretty much the only two things that you can bet will happen. No one can guarantee the stock market will never go down. And no one can predict exactly how high the stock market will rise. Still, people try and get paid a lot of money to “try,” smh. Don’t listen to the financial media and so-called experts who tell you about what “hot” stock you need to get right now. And don’t listen to them when they tell you to sell everything you own, because the market is crashing and the world is going to end.

Now not all of the people you see and hear in regards to investing should be tuned out. I personally read and study the advice of top financial gurus like John C. Bogle, JL Collins, Larry Swedroe, Paul Merriman, oh yeah and that guy Warren Buffet. I’ll never have as much money as these guys (which I’m perfectly fine with), but I’ve learned from them to never panic no matter what the market is doing. Keep buying when it’s low and the same when it’s high. There’s a term for that and it’s called “dollar-cost averaging” and I’ll go over that in the future. These guys understand the importance of staying the course and never trying to time the market. That is truly a fool’s errand.

Well, I’m pretty sure there are more rules to investing you can read about on the internet. These are simply three rules I choose to live by and for the most part has been very successful for me. One piece of advice I’d like to give you is to do your research. Understand as much as you can and start your investing as early as possible. Compound interest is a powerful force that is heavily time-dependent and can help you tremendously on your path to financial independence. If you’re looking for a way to start investing, check out Saving For Retirement…Where Do I Begin.

Some great resources and books I’ve read and referred to are listed below (some are affiliate links):

John C. Bogle – The Little Book of Common Sense Investing – The academics of investing laid out in this book are excellent and timeless.

JL Collins – The Simple Path to Wealth – Awesome book for anyone looking for an easy, simple answer to building wealth.

Paul Merriman website – Great resource with a bunch of free stuff!