Paul Merriman’s First Principles of Investing

Paul Merriman’s gives 10 basic principles for successful investing . They are principles anyone can follow because they are not overwhelming, complex, or difficult.

Here are his first five:

1. Have a plan. Even if it’s simple, even if it’s imperfect, having a plan is much better than simply following your whims and emotions. Put your plan in writing and keep it handy.

2. Start investing as soon as possible. We have said it repeatedly: Time is your best ally. Give your plan time to perform and you’ll get the benefit of compound interest. This is especially effective in tax-deferred accounts.

3. Diversify your investments. Your job and your home are both dependent on your local economy. If you invest in your company’s stock as well, you may be putting too many proverbial eggs in one proverbial basket. Diversify asset classes (stocks, bonds, cash) and diversify geographically by having some of your money invested internationally.

4. Invest regularly. Investing is a process, not a onetime event. If you make investing a habit and routinely “pay yourself first” from your income, you’ll maximize your chance for success. Best: Set up an automatic savings plan at work so you don’t even see the money before it is invested for you.

5. Maintain a long-term perspective. Microsoft Chairman Bill Gates, now the richest man alive, once said he only looked at the price of Microsoft stock about once a month. Gates knows a secret that too many investors ignore: Focus on long-term results, not what’s immediately in front of you.

Go read the rest of his 10 principles.