The “rules” of investing can easily change over time. What we once regarded as tried and true startegies may seem outdated today. So what are some outdated investment rules and which rules should investors follow instead? We spoke with some experts to get their take! See what they had to say!
Not Checking Your Retirement Portfolio
Ziga Breznik from research at Public Finance International says:
“For a long time, people investing for retirement were told that they didn’t even need to check their portfolios.
They would only gradually build over time, so what was the point in checking up on them? You could, quite literally, ‘set it and forget it’.
Personally, I don’t think that was ever sound investment advice. Investors should always keep tabs on where their money is and how it is performing, so they can adjust accordingly if not satisfied with the results.
Checking quarterly would be fine, which is something I believe most financial advisors and investment experts these days recommend.
Another outdated rule when it comes to investment is the idea that you’ve got to have some knowledge of/interest in the stock markets to be able to invest sensibly.
Well, unless you are wealthy enough to be able to afford to pay someone to do the hard bit for you.
Well, thanks to technology, the barrier to entry for investing has never been lower. There is a relatively new genre of online investment platform, known as ‘robo advisors,’ which use your stated investment preferences (gauged via survey) and complex algorithms to build and manage a portfolio tailored to your needs.
Best of all, they’re relatively low cost, and you really can ‘set it and forget it.”
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Trying to Time the Market
Sam Boughedda from AskTraders.com says:
“The rule that springs to mind is trying to time the market, especially as a long-term investor. The market, by its very nature, comes with ups and downs.
Looking back at price charts, it’s easy to see where you should have bought, but in real-time, would you still carry that same view when your money is at risk?
It is better to invest for the long-term consistently with a small amount you can afford each month in a diversified portfolio. One of the best investing rules is, as I mentioned above, investing for the long term.
Do not look at it as a get-rich-quick scheme. Instead, consistently invest over a long-term period to give your investments a chance to provide solid returns.
Another rule to listen to is that the larger the potential gain, the more risk there will be. So, while increased returns are always appealing, there is, in most cases, a significant rise in risk.”
It’s Better to Embrace Ups and Downs
Jeremy Glodam from FUTUREPROOF explains:
“Time the market so that you won’t lose! This rule is outdated and I really don’t understand how investors were believing in this rule. Better to embrace the truth of ups and downs in market and to stick to long term investment strategy.”
Buy Low, Sell High
Christopher Liew the founder of Wealthawesome.com says:
Outdated Investing Rules to Break:
- Buy Low, Sell High – Determining what’s high and low tends to be subjective. Instead, focus on the uptrend and buy what’s creating the new highs and sell the new lows.
- Buy and Hold – Holding onto your investments for long-term gains is no longer applicable in times of uncertainty. Investors must pay attention when everyone is afraid to buy. This is a perfect opportunity when the good stocks go on sale.
- Trust Your Intuition – Instead of trusting your guts, be objective and make accurate investing decisions. Always do your research and see if the track record of the company tells you to invest or not.”
“Best Investing Rules to Follow:
- Keep your portfolio diversified – It’s always a safe bet to diversify your investments. The more you add bonds or real estate funds, the more you reduce the risk of losing your investment portfolio. If you wish for moderate growth, an ideal investment portfolio would be 60% of your portfolio in stocks and 40% in cash and bonds.
- Avoid jumping in and out of the market – If you want to gain strong returns, stay invested and don’t wait for the right timing. Despite the market fluctuations, the best and worst days to invest typically stay close when the market is volatile.
- Secure an emergency fund – For long-term gains, it’s still best to have an emergency fund along with a strong financial plan. This will help you weather the tides and secure your cash flow despite uncertain times.
It Doesn’t Work in Today’s Market
Oberon from Very Informed tells us:
“When it comes to investing, there are a lot of rules that have been followed for years. However, many of these rules no longer apply in today’s market.
For example, one rule that was once considered gospel was to ‘buy low and sell high.’ However, thanks to advancements in technology, it is now possible to buy assets at a fraction of their value and sell them for a profit without ever having to hold them.
As a result, this rule is no longer relevant. Another common rule that is often repeated is to diversify your portfolio.
While diversification is still important, it is now possible to customize portfolios to specific goals and risk tolerance levels.
As a result, this rule also no longer applies across the board. Finally, the traditional wisdom of “time heals all wounds” no longer holds true when it comes to investments.
In today’s market, timing is everything and even a small delay can mean missing out on a big opportunity. As a result, investors need to be nimble and not wait for the perfect time to buy or sell an asset. These are just a few of the many investing rules that no longer apply in today’s market.”
Buy and Hold
Sep Niakan from Condoblackbook says:
“Buy cheap, sell expensive. Buy when stock prices fall, sell when they rise. Why You Should Break This Rule:
How do you define ‘low’ and ‘high’? The first rule of trading: Buy what’s making new highs and sell what’s making new lows.
Buy-and-hold: the “buy-and-hold” technique is popular. Hold onto your investments, especially during dips, for long-term returns.
When stocks are pricey, particularly around all-time highs, I recommend investors to sell and purchase when the market falls.”
Holding Onto Crypto
Stefan Ateljevic, cryptopreneur & founder of PlayToday, explains:
“When it comes to cryptocurrency investments, forget the “HODL” strategy. That is, the idea that you should hold your crypto for several years until you’ve amassed a fortune to cash out.
This was great advice pre-pandemic as Bitcoin, and cryptocurrency has always respected the established “Bitcoin halving cycle” every few years.
Since the crypto boom that started during the pandemic, the entire HODL strategy has been thrown out the window. Add to it the economic instability of the world and you need to have nerves of steel to watch your investments go on a roller coaster ride.
Sure, the price might recover and “moon” at any moment, but nowadays it’s more unpredictable than ever.
Instead of Holding, people should learn to range trade and liquidate their assets when the markets start going down. Most people don’t do that because they are stubborn and abide by outdated advice to “HODL” from veteran crypto experts.
This idea is simply illogical nowadays as you can make better gains by selling high and buying low. Sure this means taking some losses, – which many can’t handle – and reminding yourself that your bigger gains will more than compensate when it’s time to accumulate again during a bear market.”
Not to Invest in Penny Stocks
Jonathan Saeidian, founder of INITIATE.AI says:
“What are some investing rules you shouldn’t follow anymore?
Investment rules are a great way to start investing, but here are some that have become outdated.
1. Don’t invest in penny stocks. The stock market is volatile, and it’s best to stick with companies that have a proven track record of success.
2. Don’t invest in riskier investments like options or futures. If you’re not familiar with these types of investments, don’t risk your money without doing your research first!
3. Don’t buy an investment unless you know how much it costs and how much you’ll get back when you sell it. If you don’t understand what an investment is worth, or how much you can expect from it, then leave this one alone!
What are the best investing rules you should follow?
Here are some fundamental things that you should know about investing, and they’re the best rules you should follow:
1. Understand why you’re investing. If you don’t understand what’s happening with your money, then it’s going to be harder for you to make good decisions about where to put your money.
2. Know what kind of investments you want to make. It’s better not to invest in something if you don’t have a good idea of what kind of return you’re looking for or how long it will take before that return happens.
3 Develop an investment plan and stick with it! If your investment plan changes too often, then it’s probably not one that’s likely going to work for you in the long run.”
Not Investing in What You Don’t Understand
James Anderson, CEO of Veritas Buyers, says:
“Outdated investing rules you shouldn’t follow:
-You shouldn’t invest in something you don’t understand: In the past, investors were told to only invest in things they understood. However, with the advent of technology and the internet, there are many ways to research investments and get up to speed quickly.
-You shouldn’t invest in individual stocks: While there is certainly more risk involved with investing in individual stocks, there are also more opportunities for reward. With the right research and diversification, investing in individual stocks can be a smart move.
-You should always buy low and sell high: While this may be the goal, it’s not always possible (or realistic). Sometimes, selling low to salvage assets from a sinking ship may be necessary.
The best investing rules you should follow:
-Have a plan: Without a plan, it’s easy to get caught up in the emotion of the market and make impulsive decisions. Having a written plan will help you stay disciplined and focused on your long-term goals.
-Diversify: Diversification is key to mitigating risk. By investing in a variety of asset classes, you can help protect yourself from losses in any one particular area.
-Know your risk tolerance: It’s important to understand how much risk you’re comfortable taking on. If you’re risk-averse, you may be more conservative with your investments. On the other hand, if you’re willing to take on more risk, you may be more aggressive.
-Rebalance your portfolio: As your investments grow and change over time, it’s important to periodically rebalance your portfolio to ensure that it’s still in line with your goals.
-Stay disciplined: Investing can be a long-term game, and it’s important to stay disciplined throughout the ups and downs of the market. This means sticking to your plan, even when making changes is tempting.”
Don’t Invest in What Everyone Else Is
Michael Ryan, owner of Michaelryanmoney.com, explains:
“There are a few investing rules that you shouldn’t follow anymore.
One is that you shouldn’t invest in something that you don’t understand. A lot of people think that they should just invest in what everyone else is investing in, but that’s not always the smartest thing to do.
You need to make sure that you understand what you’re investing in, and that you’re comfortable with the risks involved. Another investing rule that you shouldn’t follow is that you shouldn’t invest money that you can’t afford to lose.
This is a common rule that a lot of people follow, but it’s not necessarily a good one. Just because you can afford to lose the money doesn’t mean that you should. You need to think about whether or not you’re comfortable with the risks involved before you invest.
The best investing rule to follow is that you should invest for the long term. This means that you shouldn’t try to time the market, and you shouldn’t invest money that you need in the short term.
You should invest money that you can afford to lose, and you should be comfortable with the risks involved.”
Only Invest in Blue Chip Stocks
Jennifer Spinelli, Founder & CEO of Watson Buys, says:
“What are some investing rules you shouldn’t follow anymore?
#1. Don’t invest in what you don’t understand
This may have worked well in the past, when there were far fewer investment options and securities were simpler. But today, with the vast array of investment products available, it’s nearly impossible to avoid investing in something you don’t fully understand.
#2. Follow the herd
Investors often make the mistake of following the crowd into hot investments, only to see their hard-earned money disappear when the market corrects. While it’s important to be aware of what other investors are doing, you should never blindly follow them.
#3. Only invest in blue chip stocks
While blue chip stocks are often seen as safe and reliable investments, they may not offer the best returns in the long run. It’s important to diversify your portfolio with different types of stocks in order to maximize your chances of success.
What are the best investing rules you should follow?
#1. Have a long-term perspective
Investing is all about taking advantage of compounding returns over time. The longer you stay invested, the more time your money has to grow.
#2. Invest regularly
By investing a fixed amount of money on a regular basis, you’ll be able to take advantage of dollar cost averaging. This technique can help to smooth out the ups and downs of the market, and can make it easier to stay disciplined with your investing.
#3. Diversify your portfolio
Don’t put all your eggs in one basket. Make sure to diversify your portfolio across different asset classes and investment vehicles. This will help to reduce your risk and improve your chances of success.”
Investing in Industries You aren’t Familiar With
Tiffany Payne from PharmacyOnline says:
“It’s really outdated to ‘invest what you know.’ Many say it is risky to invest in fields you aren’t an expert in!
Now, it’s totally fine to invest in industries you don’t know about but you can learn about.
Also, it’s important to ask an expert about the steps you are going to take, but remember it’s totally fine to invest in (outside of your comfort zone).
Make Sure Dangers are Fully Revealed to You
Don’t Let Your First Financial Strategy be Your Last
Not Entering Private Markets
Trying and testing the market is no longer required. This rule doesn’t apply anymore with a recession looming over our heads. It means there are higher stakes anyway while investing. Instead of monitoring daily charts, you should invest long-term. It’s more profitable.”
Only Using a Credit Card for Emergencies
Dan Shepherd, owner of VEI Communications, says:
“You might have heard it before, but experts tell that only using a credit card for emergencies is a safe decision everyone should follow. This does not hold up in theory any longer.
When facing a difficult financial situation, survival comes first. Following safe practices can wait. For many, relying on your credit line as an emergency fund can be the only possible decision.
Sometimes, being responsible does not amount to healthy money choices. So it would help to think through the potential advantages and disadvantages before leaning toward an expert’s opinion.
When the financial situation is stable again, you can focus on paying down your balance.”
Final Words: What are Some Outdated Investment Rules?
There are plenty of rules our experts seem to find outdated. It is always important to reeavluate your investment strategy and make sure the techniques you are clinging to still work well in today’s markets.
And as always, make sure to speak with a qualified advisor before making any major decisions that could adversly affect your wealth!