Money Rules

The attached article has a terrific list of twenty investing rules, all of which are important and should always be considered. My two favorite are below:
 
5. It’s the portfolio, stupid
Asset allocation…is the overwhelmingly dominant contributor to total return.
–Gary Brinson, Brian Singer and Gilbert Beebower
Most investors concentrate on trying to choose the best stock and pick the perfect moment to buy or sell. It’s a waste. What really matters to your long-term returns is asset allocation–that is, how you split up your portfolio.
Since researchers dropped this bombshell 20 years ago, experts have debated the size of the asset-allocation factor. Some say it accounts for 40% of the variation in investors’ returns; others (like the original researchers) say 90%. But no one refutes that it’s major. For help getting the best mix for your goals and risk tolerance.
 
6. Average is the new best
The best way to own common stocks is through an index fund.
–Warren Buffett
Here’s the logic behind index funds, which aim simply to match the return of a market index: The average fund in any market will always earn that market’s return (because in aggregate investors are the market) minus expenses. Since index funds match the market but have much smaller expenses than other funds, they will always beat the average fund in the long run. It’s hard to argue with the math, and history bears it out (see the performance stat at right). Besides, if the Greatest Investor of Our Time believes that index funds are superior for most investors, shouldn’t you?
 
http://notestomyself.wordpress.com/2007/08/24/20-timeless-money-rules/