Three Rules of Thumb for Investing

My blog entry was supposed to have come out last Friday, as this is my scheduled updating day. Unfortunately, things came up once again, and moi wasn't able to update anything up until today.
While the financial fallout continues to be in the headlines (this yahoo link keeps on updating its headline) and Ben Bernanke warning that it could spill over to the US economy (hasn't it already?), what can us small investors do?

I read one local site's take on the issue, which I like. And I've got my four syllables for everyone -

DI-VER-SI-FY

Everyone, including this blogger, has forgotten the golden rule in investing. To joke about it, you'd be in better shape if you had investments in both Merrill Lynch and Lehman Brothers, than solely in just Lehman yes?

I've got another four syllable advice for you

TIME HO-RI-ZON

Oftentimes, we forget that investments take time to grow. Fast money? More like fast money down the drain.

People always follow the herd, and the last person to follow it usually ends up buying at the most expensive, at the highest peak of the asset's price. I always wonder how the poor guy feels now when he bought stocks in 2007. Herd followers most often make the poorest of decisions, oftentimes forgetting that when he bought the stock (or whatever asset for that matter), it wasn't supposed to be just for an overnight duration.

I am speaking from experience here. So learn from it.

Lastly, another golden rule is this 4+1 syllabic word, and that is

E-MER-GEN-CY FUND

Don't be enamored by the (attach noun here like real estate, insurance, stock, what have you) broker. I once posted an entry about it. Why do I say so?

One of the magical one liners these brokers use is this -

"Buying (my product) is also a (savings tool, investment, etc)"

This is true. But somewhere along the sales pitch, this person forgot that the prospect's salary goes to pay for his / her rent, food expense, utilities expense, perhaps his other mortgage, etc. That is why folks, in the off chance that you get suckered into deal by a sweet talking agent, it's best to have an emergency fund tucked into your investment portfolio. You never know when rainy days - or financial meltdowns - will come along.