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Question: What are the golden rules for investing money in different avenues?
Answer:
Of course, there are infinite articles on the web offering investment advice. So why read mine? Because I share my personal experience with you I am not an Old age person with great Experience but have learned a lot in some recent years and experiences teaches more than theories you will agree with me on this.
Before we get to the lessons, a few more disclaimers: this is investment advice, not trading advice. I’m sharing are more about gradual wealth development than get-rich-quick ideas. Second, although diversification is one topic I’ll cover, my thoughts are primarily about investing in stocks, and other assets like real estate, crypto, forex, or gold. So now, without further ado, my five Ds of sound investing.
01| Do it now
Commonly phrased as ‘Time in the market beats timing the market,’ this is probably the most important takeaway of my whole post. Why? To start, inflation eats up around 6% (sometimes more) of your money each year. That means if you’re not at least getting 6%+ growth in your savings, you’re actually left with less effective money each year.
Perhaps more obvious: the sooner you start investing, the more growth you’ll have. The internet is littered with articles contrasting the savings one accumulates when starting at age 25 versus 35 (or, heaven forbid, 45). Of course, simply blindly buying into random stocks isn’t the right approach either — which is why there are more words below.
02 | Diversify
Would you put all your precious, fragile eggs in one basket? Well, maybe, if you only had one basket. But with metaphorical eggs (dollars), you have the freedom to put them in as many baskets (investments) as you want. If you’re in the 20–40 age range (as I imagine most readers of this are), stocks ought to be your main holding. That’s because while the stock market can be hugely volatile, it produces positive returns in the long term — historically, about 75% of years see gains, and the worst annual return of any 20-year stretch since 1979 was still 6.4%. You can even afford to invest more aggressively in high risk/high reward stocks — for example, tech companies and IPOs (initial public offerings, which are opportunities to ‘get in on the ground floor’ of a company in its early days on the stock market). For example, one share of Google purchased on the day of its IPO in 2004 (for about $100) would be worth around $3000 today.
The traditional complement to stock investments is bond investments, which *tend* to perform inversely to stocks (in other words, when stocks move up, bond prices move down). When you invest in bonds, you’re essentially lending money to companies or governments, with the expectation they pay you back (with interest) over time. The riskier the bond, the higher the yield, or interest you’ll be paid. Bonds are different from stocks in that they are fixed-income investments, meaning you’re not hoping for growth in share price, just steady interest income that exceeds what you’d make by simply getting interested from a bank. I personally don’t invest directly in bonds, but I do recommend putting a portion of your portfolio into either ETFs (exchange-traded funds) or mutual funds, both of which invest in a broader basket of assets (including bonds) and therefore reduce your exposure to any one thing.
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ETFs have no fees, but target only a specific set of equities that all have something in common (e.g. the same index, industry, bond type, etc.) Mutual funds, on the other hand, are managed by companies like Vanguard and Fidelity, and allow you to invest in a balanced portfolio of stocks, bonds, etc. hand-picked by a fund manager. You can even buy mutual funds that target a specific year of retirement. One note: because mutual funds are actively managed, they require fees to pay the salary of the people making the investment decisions. Not all funds have the same fee, so pay attention and compare to avoid paying high fees.
Of course, diversification doesn’t end at stocks and bonds. While I recommend most millennials and Gen-Zers focus on stocks, it’s good to allocate a slice of your investment pie to other assets.
03| Dividends
Appreciation in a stock’s price is not the only way to grow your money. Many companies — particularly more established ones whose revenue growth trajectory (and corresponding share price growth potential) isn’t as enticing to investors — offer regular cash payouts to make themselves more attractive investments and offset the lack of appreciation potential. While the current coronavirus crisis has caused many struggling companies to reduce or cut dividends entirely, I strongly recommend making dividend stocks a part of your portfolio. This helps ensure continued income, even when the stock itself is down. Popular dividend stocks include TCS, Nestle, Coca-Cola, Disney, and Home Depot.
You can also access dividend payouts indirectly through mutual funds. Say you own 10 shares of mutual fund ZXXXX, and that fund owns 100 shares of TCS. When TCS pays its quarterly dividend, you’ll receive a portion of the dividend paid to the company that manages ZXXXX, relative to your slice of ownership in TCS. The mutual fund will aggregate all the dividend payouts for all the stocks it owns, and deposit the money into your account (or reinvest it, according to your preference).
04 | Do it gradually
The most basic way to put this principle into practice is to automatically invest a percentage of your income each week or month. This is typically done via 401k contributions through your employer but can be done on your own as well.
One of the most common mistakes I’ve made over the years is buying and selling with an ‘all-or-nothing’ attitude. There was once some logic to this. For many years, making a trade cost money. I once paid $20 per trade, then $15, $10, $5, and finally — due mainly to pressure from Robinhood’s free trading platform — most brokerages finally did away with trading fees entirely. In a world in which each trade ate into your profit, it made sense to minimize the number of trades you did. But in a ‘free-trade’ world you can buy or sell a single share at a time without stressing over fees, making it easier to enter and exit positions more carefully. This is known as dollar-cost averaging, and it’s even available to users on many investment platforms (even Coinbase and Fundrise) to help you avoid ‘market-timing’ tendencies.
These days I buy and sell in smaller chunks, which helps ensure I’m not missing out on big price movements up or down. Reaping profits occasionally also ensures you have dry powder to deploy when the market heads south. If all your cash is tied up in stocks, you’ll be unable to take advantage of rare buying opportunities.

My main rule of thumb is to buy on red days and sell on green days — meaning only buy when the market is down and only sell when it’s up.

Another recent and related innovation is fractional investing. Since many stocks have per-share prices outside the reach of new investors (Amazon trades near $2500/share, to say nothing of Berkshire-Hathaway Class A’s $250,000+ share price), fractional investing lets you buy slices of shares based on whatever amount you can afford. If you want in on Amazon but you’ve only got $100 — fractional investing gets you started with 1/25 of a share. This feature is now available to Fidelity and Robinhood customers, and perhaps others too.
05 | Don’t believe the hype + Don’t panic
Yes, I’m squeezing two principles in one, because five feels better than six-plus these are essentially two sides of the same coin. It’s essentially another way of phrasing Buffett’s famous ‘Be fearful when others are greedy and greedy when others are fearful’ adage. The point here is: don’t let emotion guide your decisions, because emotions will lead you astray. Every. Time.
Let’s start with hype avoidance. These days, especially with help from the YOLO-style traders found on wallstreetbets (intentionally not linking out, as I don’t want to encourage risky behavior) as well as residual behavior from the days of daily double-digit gains in crypto prices in 2017, you’ll sometimes see stocks that skyrocket without any apparent basis in fiscal reality. To take two recent examples, TSLA (Tesla) and SPCE (Virgin Galactic), both of which saw hockey-stick shaped growth in their share price in a matter of weeks. In 2018 it was weed stocks, and before that, crypto. And it’s always happening with various so-called penny stocks, which are often pharmaceutical companies. (FYI: Penny stocks are not necessarily worth just pennies, but generally less than $5 per share.) For example, pharma stocks might soar due to a drug trial that goes well, then come crashing back to earth if the FDA ultimately rejects it.
I tend to avoid hype stocks, though I have still learned lessons about them since I’ve sometimes found myself inadvertently owning a hype stock.
Bonus golden rule #6: Don’t take investing advice from someone who gets Warren Buffett confused with Golden Corral.
Hopefully, you found this a helpful introduction.
Thanks