Five secrets of investing

Marshall Loeb

New York - Investors feeling shaken by the recent market fluctuations may want to revise their recipe for success. In the September issue of Money magazine, senior writer Jason Zweig offers five secrets of successful investing:

1. Don't go back for more.

Anyone who has made a bundle off a lucky investment will be tempted to angle for a second windfall, but the odds of getting one are slim. "Be especially wary of investing in stocks or mutual funds that remind you of the one you made a killing on long ago," writes Zweig, "Chances are, any similarities to another investment, living or dead, are purely coincidental."

2. Don't trust your instincts.

"Many of the world's best investors have learned to treat their own feelings as reverse indicators," Zweig writes. "Excitement becomes a cue that it's time to consider selling; fear tells them they should be thinking about buying." The lesson: when it comes to investing, your gut may be lying.

3. Beware your triggers.

"The stock market generates signals that can goad you into trading," warns Zweig. Don't be Pavlov's dog. Avoid obsessively checking stock prices on the computer. And if you're watching CNBC for stock updates, turn the sound down, so the bells and shouts of the trading floor don't spur you into action prematurely.

4. Divide and conquer.

Investing requires being tolerant of risk, but you don't want to jeopardise your entire nest egg. Play the odds by putting 90% of your money in a low-cost, diversified index fund. The other 10% can be used for purely speculative trades. But once it's gone, it's gone. Don't dip into your savings to replenish it, Zweig cautions.

5. Stay calm.

If great gains are driving you to buy, or losses propelling you to sell, think before you react. It's always a bad idea to make investment decisions in the heat of the moment.

- Dow Jones

?