From the book The Big Investment Lie by Michael Edesess published by Berrett-Loehler Publishers, San Francisco, 2007. If you go to a financial planner, at some point there is a fee involved and similar to every other sales, sometimes the smart thing for a financial planner is to sell you the expensive items. There is value in the financial planner, but deal with them in the understanding part is a sales process.

Mr. Edesess has come up with 10 Commandments for Smart Investing.

1. Follow a wealth-building strategy, not a gambling strategy  – be similar to the turtle, not the rabbit. Long term horizon making compound interest work for you. If you keep your debt low and most of your money in your home and in dividend producing stocks that have paid consistently over the years, you will do well.

2. Stop searching for the Holy Grail – give up the futile quest to beat the market. Some years you will, most you will not, due to the market fluctuates. Refer back to number one.

3. Stop believing that past performance predicts future performance. If you look at a mutual fund, the best number will be highlighted – it is good marketing. Look at the 5 year or 10 year number. Last year’s star fund is not likely to repeat again because of simple math. If you have 1 penny in your pocket and find a penny on the street, you have doubled your money. If you have $ 50 in your pocket, and find a penny, you have more, but not much.

4. Don’t be duped by the false claims of investment manager and advisers. In every sales or client meeting, someone is trying to find what sales pitch works. The old rule whatever works, works.

5. Fire managers and advisers who charge more than bare bones fees. All organizations charge fees of one sort or another, some fees are higher or lower, you should pay a fee. The concern is how much is reasonable for both parties. Remember if you own a fund and the fee is 2%, your fund has to make greater than 2% before you start to make money. Is it?

The other 5 commandments will be in tomorow’s post.

There are always more questions than answers, till the next time – to raising questions.