| Here is a brief recap... No. 1: No asset class has outperformed a diversified portfolio of equities. It's a bit surprising how many investors have only a small percentage of their assets - or none at all - in stocks. Big mistake. Over the long haul, stocks have outperformed cash, bonds, commodities, gold and real estate by a huge margin. Case in point... despite the Great Recession, global pandemic and sharply-higher interest rates, the market is up over 950% from its March 2009 low. No. 2: Your asset allocation is responsible for 90% of your long-term investment returns. A brief example will illustrate this. Let's say you have a conservative allocation that is 30% stocks and 70% bonds, while I have a less conservative allocation that is 70% stocks and 30% bonds. Even if the individual stocks in your portfolio double the return of the market, my equity returns will be greater than yours even if I hold a plain-vanilla S&P 500 index fund. Why? Because my asset allocation devotes more than twice as much to equities. No. 3: Diversify but don't overdiversify. The great fortunes were all built on concentration. Elon Musk and Bill Gates are not among the richest men in the world because they spread their risk so far beyond Tesla (Nasdaq: TSLA) and Microsoft (Nasdaq: MSFT). Even the Dow Jones Industrial Average is made up of just 30 stocks. The chances of you owning a hundred or more stocks and outperforming the S&P 500 are essentially nil. No. 4: Market timing and economic forecasting don't work. Remember the recession of 2023 and 2024 that was a "sure thing," because the Federal Reserve was aggressively raising rates and we had an inverted yield curve? Of course you don't. Because that almost universally-predicted downturn never happened. Also, who forecast these big market moving events: the crash of 1987, Saddam Hussein's invasion of Kuwait, the collapse of Long-Term Capital, the quick rise and even faster collapse of the internet bubble in the late 90's, 9/11, the sudden bankruptcy of Bear Stearns and Lehman Brothers, negative interest rates and the COVID-19 pandemic? No one. So why listen to market prognosticators who can't see around the corner any better than you or me? No. 5: The way to beat the market is with your security selection. No one slays the S&P 500 by jumping from cash into the market and back into cash over and over again. The way to enjoy superior returns is by owning great-performing companies that appreciate much more than the average stock. The "Magnificent Seven" - Apple, Meta, Microsoft, Alphabet, Tesla, Nivida and Amazon - are fine examples. There will always be stocks that deliver blockbuster returns. Owning just a few of them can have a huge impact on your total return. No. 6: In the investment world, you get what you don't pay for. This is the opposite of what's true in virtually every other aspect of life, where high prices are generally a sign of superior quality. But it's not the case in the financial arena where your annual return is reduced by the amount you pay in fees. Studies consistently show that over periods of 10 years or more, not 1 in 10 fund managers can outperform their benchmark. These are low odds. The goal is for you to get rich, not your financial advisor. No. 7: You need to tax-manage your portfolio. This starts with your Asset Location strategy. Put your high-yielding securities - like junk bonds, real estate investment trusts and big dividend payers - in your qualified retirement plan where they will compound tax-deferred. Put your tax-efficient individual stocks and index funds in your non-retirement accounts. Offset your realized gains with realized losses, where possible. Own state-specific, tax-free bonds if you are in the upper tax brackets. And do your short-term trading in your retirement accounts. Follow these basic steps and you will legally stiff-arm the IRS - without raising any eyebrows. No. 8: Be a rational optimist. Nearly 40 years ago, I began studying the world's greatest investors, like Warren Buffett, Peter Lynch and John Templeton. What surprised me was that these men had an optimism about the future that simply didn't have an off switch. We all know the many negative developments because the media cover them ad nauseum. But human beings have enjoyed enormous progress over the years, including faster communications, safer transportation, life-saving medicines, and countless other innovations. If you truly believe that we live on a horrible planet at a terrible time and the world is going to hell in a handbasket, why risk your hard-earned money in the stock market? (I'll have more on this important subject in my upcoming column.) Pessimists see the difficulties in every opportunity. Optimists see the opportunities in every difficulty. No. 9: To beat the market, you need a genuine edge, not just a perceived one. The world's financial markets offer limitless monetary rewards for success. That means you are competing against the smartest people with multi-million-dollar budgets, who have hired the most capable teams using the latest and greatest technologies. If you are going to beat them, you need to have a genuine advantage. Here's just one... Corporate insiders have access to material, non-public information about the business prospects for the firms they run. That gives them an unfair advantage when they trade their own companies' shares. Riding the coattails of the best of them is a proven way to beat the market - and most professional investors. No. 10: Your true wealth is measured by "the magnitude of your gratitude." Your most valuable asset is not your house, your bank account or your investment portfolio. It's the amount of time you have left on this little blue ball. If you have decent health, a loving family, good friends, and varied interests, consider yourself blessed. But recognize that this only touches the surface. For 99.9% of human history, life was a brutal struggle to stay warm, stay fed, and stay safe in an unforgiving world. Most of our ancestors were dead by the age of 30, usually of unnatural causes I strongly recommend Enlightenment Now and The Better Angels of Our Nature by Harvard psychologist Steven Pinker. Read them and you will have a better understanding of just how lucky you are. And that can't help but make you feel wealthier. Good investing, Alex | 
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