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Principles of Sound Investing

Principles of Sound Investing

| November 26, 2018
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Tim Johnson, Chief Investment Strategist at Lincoln Financial Advisors, talks in this video about the important 7 Investment Principles. I have outlined some of his key important messages, from the video, below.

Ten years ago, the financial world was in a dark place. Today is a much different world. Stocks have advanced strongly and investor’s sentiment is positive. The past crisis was serious. Many lost much of what they had and may never trust in investing again. However, most that followed solid advice and investment principles, survived and flourished since that time. As Warren Buffet once said, “Sound principles can get one through almost anything.” I strongly agree.

We know that volatility is a part of investing. History tells us that a 10% decline in the equity in markets occurs about once a year. Again, sound principles can help us get through them. With this in mind, these are a few of our investment principles that we find vital to our process.

Investment Principle #1

There is no such thing as “short term investing”

Investment Principle #2

Valuation still matters.

Investment Principle #3

Market timing doesn’t work

Investment Principle #4

Market indexes and benchmarks can tell a much-distorted story

Investment Principle #5

Optimism is key. We recognize the powerful upside to human ingenuity and innovation over time.

Investment Principle #6

Information is not knowledge

Investment Principle #7

The traditional rules of investing are still true.

Those Core Principles are:
-Diversification
-Sound value
-Patience
-Follow your plan
-Maintain long-term perspective

In the end, talk is cheap. It’s easy to talk about sound principles and plans when things are calm. What matters is to have those plans so deeply imbedded in one’s philosophy that they become second nature. It is also important to have the tools to deliver those principles. Here we use mathematically based allocation and analysis with knowledge of market history and discipline to deliver for our clients. That is the power of informed disciplined advice.

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