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Important Rules of investment

Important Rules of investment.

Rather than make guesses regarding the direction of the market, here are some investment rules to follow:

Rule 1: Do not attempt to time the market. Statistically it is a certainty that a minority of the millions of investors can time the market in the short-run but the problem is that very few, if any, can time the market for sustainable periods of time. Thus don't try to time or predict the market instead keep invested for longer periods.

Rule 2: Patiently make good investments, regardless of the economic conditions. It is best to assume the market will go nowhere and invest accordingly. Paying attention to a hot or cold economy leads to investors chasing their tails. Good investments should outperform in the long-run, regardless of the macroeconomic environment.

Rule 3: Diversify. In the midst of the crisis, diversification didn't cure simultaneous drops in most asset classes; however ownership of government Treasuries, cash, and certain commodities provided a cushion from the economic blows. If you are invested for longer-term, the benefits of diversification become more apparent and it always makes absolute sense to spread your risk around.