Reto’s rules of investing

1. Investment objectives. Write down your clients’ expectations regarding growth, income, safety, and time horizon.

2. Investor profile. Write down your assessment of how knowledgeable clients are, their risk tolerance, their personal situation regarding family, business, etc., and the financial ramifications.

3. Total return. There is only one long-term investment objective — maximum total after-tax return.

4. Focus. Unless you have hard evidence that circumstances require a change, stick to the agreed-upon investment plan.

5. Conservatism. Err on the side of conservatism.

6. Margin of safety. Always invest with a margin of safety.

7. Quality matters. Buy only the best of breed in periods of economic/market uncertainty.

8. Success
requires study and work. It is harder than you think.

9. Accept errors. Making errors is human. Repeating errors is a sign that you did not learn.

10. Learn to reduce your fear. Once you learn to reduce your fear because you understand what is going on, because you are informed and be-cause you don’t rush and panic, you become a better investor for your clients.

11. Move on. Get out if something is not working. Move on.

12. Move on, lock in profits. Lock in profits if they exceed a certain level, instead of being tempted to try to squeeze out a little more profit by holding those investments longer.

13. Do not buy illiquid securities. Buying illiquid financial products will get you in trouble when you try to sell them, if not before.

14. Value. Focus on value, because most investors focus on outlooks and trends.

15. Follow cash. Follow and understand the cash flow of your investment. If you can’t understand the cash flow structure, stay away.

16. Don’t chase past successes. People think that if something worked once, it will again. When markets are up, they invest more. They also tend to choose investments based on past success — without studying the future outlook.

17. Let time work for you. Use time and compounding as instruments for making decisions.

18. Timing. Buy when short-term owners have finished selling and sell when they have finished their buying, always opposing the fashion.

19. Opportunities. Buy when blood is running in the street.

20. Think long-term. Accept the cycles and exploit the swings to establish low cost basis, but do not rush.