The Rules of the Road

Volume IV, No. 1
Homer's Hot Tip February 5, 2006

Kid: Homer, do you have any words of wisdom for 2006.

Homer: For you Kid nothing works but maybe someone out there will take it to heart. There are some basic fundamentals everybody should know. I call them my TEN RULES of SMART INVESTING.

• Rule #1. Don't ever buy what someone tells you without first investigating it including TIPS from me.
• Rule #2. If you don't know anything about the stock market other than somebody told you can make a quick buck trading in it, avoid it like the plague. Otherwise you will lose your shirt.
• Rule #3. If you want to invest in the stock market, do not give your money to someone else to invest for you. Every broker in the world writes down on their order to purchase stock for you that your order is unsolicited even if they have been telling you about it for a year. Be cool, be smart, and hold on until you are absolutely certain you want to invest in a stock, bond or mutual fund.
• Rule #4. If you are not a professional stock trader, do not make your living selling and buying securities and do not buy anything called a "DERIVATIVE". If the name doesn't throw you, the losses will.
• Rule #5. Never buy a mutual fund from a mutual fund salesdude.
• Rule #6. Never buy a mutual fund off a tip sheet.
• Rule #7. Never trade mutual funds. This is the dumbest idea that has ever been put over on the public.
• Rule#8. Before you buy a mutual fund investigate who the manager is and if the track record of the fund is his or hers. If it is not, find another one. Mutual funds are attractive based on their track records. How do you know if John can duplicate what Mary did?
• Rule #9. If you really want to invest in the stock market, study all you can and learn all you can before you invest one dime. One thing we know about the stock market since its inception in the 18th century is that it always goes up over the long term. If it did not the good old USA as we know it would not exist. Period. You have time. Take it.
• Rule #10. Never buy or own more than six securities at any one time. It is almost impossible to follow more and keep up with each and every one you own.
• Rule #11. The bonus Rule -- Never put all your eggs in one basket!

Kid: Wow Homer, are those rules in concrete?

Homer: Are you kidding? They are subject to change at a moments notice. That's the market Kid.