In order to lead by example, I will follow some Rules. The rules have to be followed at all times and are the basis on which the portfolio is build. Each investment I make will be checked against these rules.
At the same time I will try to follow a couple of Guidelines that I try to keep in mind during all decisions. Guidelines can be diverged from, but only with compelling arguments.
The main gist of the strategy would be: invest regularly in a broad index at low costs.
There are several costs that I pay when investing in securities. We all know the benefits of Compound Interest. However, We should also realize that there is a similar opposite force called Compound Costs. Recurring costs will eat away at your growth rate. Costing you a lot of money in the long run.
Rule #2: buy and hold
As I’m in it for the long haul, investments are made, not retracted. This buy and hold strategy will keep me from making mistakes (buying high, selling low) and keep costs down. The only reason to sell securities would be if there is a similar allocation with lower costs.
Timing the market is difficult, if not impossible. Therefore, we’re going to make investments regularly. The amount to invest is about €1000 a month. Or 3 times that amount, every 3 months, if that significantly reduces costs.
Rule #4: invest diversely
We’re not trying to beat the index. So invest in the index.
Rule #5: invest with faith…or know the risks!
Before throwing my hard-earned cash towards a security, I better make sure that whoever is on the receiving end, I have complete faith in. A great reputation is what I’m looking for.