20 Timeless investment & Money Making Rules (Part 2)

11. Buy low
If a business is worth a dollar and I can buy it for 40 cents, something good may happen to me.
--Warren Buffett
The best Dow stocks of the past 10 years don't include Microsoft or Intel. But Caterpillar (Cat) makes the cut with a 212% return. In 1997, in the midst of tech madness, the market was so bored by the company's industrial-machinery business that investors paid just $11.50 for each dollar of earnings. If the stock's current value of 16.1 times earnings is right, that's nearly a 30% discount. Smart investors didn't need to foresee the coming construction boom. They only needed to call a bargain a bargain and trust the market to eventually wise up.
12. Invest abroad
The World is a book, and those who do not travel read only a page.
--St. Augustine
Over the 10 years through 2006, a portfolio split 80%-20% between U.S. and international large-cap stocks would have returned an average 8.4% a year, roughly the same as a portfolio invested 100% in domestic stocks. But because U.S. and foreign markets partially offset one another's ups and downs, the global portfolio was 4% less risky than the all-American (see Rule No. 4). Most Americans have less money in foreign funds than the 15% to 25% experts recommend. But you don't have to be like most Americans.
13. Keep perspective
There is nothing new in the world except the history you do not know.
--Harry Truman
When the Dow sheds 300 points in a day, it's natural to feel doomed. And when the market surges, it's easy to be convinced that stocks have entered "a new paradigm," to echo a bubble-era phrase. Don't delude yourself. As Sir John Templeton notes, "The four most expensive words in the English language are, `This time it's different.' " To keep your perspective, remember: In every bull market since 1970, stocks have dropped by 10% or more at least once. Average time to get back to even: 107 days. Over time, markets tend to stick close to their long-term trends, called "regression to the mean." Manias and panics never last.
14. Just do it
It takes as much energy to wish as it does to plan.
--Eleanor Roosevelt
Financial planning is an unnatural act. The brain is wired to make us undervalue long-term goals and exaggerate the cost of short-term sacrifice. Yet studies show that people who do even a little retirement planning had twice the savings of those who did almost none. Heed the words attributed to Mrs. Roosevelt by doing the following: Set concrete, attainable goals. "I'll pay an extra $100 a month on my credit card" is more likely to succeed than "I'm going to get my act together."
Then commit. Tell someone your plan and agree to a penalty--you'll do your spouse's chores for a month if you haven't saved $10,000 extra by June.
15. Borrow responsibly
As life closes in on someone who has borrowed far too much money on the strength of far too little income, there are no fire escapes.
--John Kenneth Galbraith
Face this truth: If you let them, lenders are only too willing to advance you more than is good for your family. Mortgage banks and credit-card issuers don't care if your monthly payment makes it impossible for you to sock away money in your 401(k) or fund your kid's 529 plan. You need to set your own rules, including:
No credit-card debt. Period. It's never okay to pay 15% to borrow for consumption.Borrow only to buy assets that appreciate. A home, yes. Education, sure. A vacation, a fancy dinner or even a 50-inch flat-screen TV? No way.
16. Talk to your spouse
"In every house of marriage there's room for an interpreter."
--Stanley Kunitz
Your most important financial partner isn't your broker. It's your spouse--you know, the one who probably owns half of all you do and whose fate is inextricably linked with yours. But research shows that spouses often don't agree on even such basic info as their income and savings. Wake-up call: To make smart decisions, you need to talk, and if you're like most couples, to do a better job at it.
Men: Don't assume she doesn't care about this stuff. She does. But you need to lay off the jargon and speak English. Women: Don't just leave it all to him. At a minimum, know where the key papers are and how your money is invested.
Both: Focus on goals, not on being right. It's not a contest.
17. Exit gracefully
Only put off until tomorrow what you are willing to die having left undone.
--Pablo Picasso
Despite the words he reportedly uttered, Picasso was willing to die without planning his estate. It took years for his heirs to reach a settlement with French authorities. Although you may not have masterpieces to bequeath, you have no excuse not to take elementary steps to make life easier on those you'd leave behind. Covering the basics shouldn't cost more than $1,500.
To find a lawyer, ask friends and colleagues for recommendations or get referrals online at the website of the American Academy of Estate Planning Attorneys (aaepa.com). For tips on dividing emotion-laden personal belongings--more often the flash point for family tension than money or big-ticket items--check out the website Who Gets Grandma's Yellow Pie Plate? (yellowpieplate.umn.edu).
18. Pay only your share
The avoidance of taxes is the only intellectual pursuit that carries any reward.
--John Maynard Keynes
It's all well and good to put time into choosing the right investments. But being conscious of taxes puts money in your pocket too (at least it keeps it from being taken from your pocket, which amounts to the same thing), and the payoff is swift, certain and there for the taking. So take full advantage of tax-deferred benefits at work, like 401(k)s and flexible spending accounts. Stick with tax-efficient investments like index funds. And claim every deduction you're entitled to. According to the Government Accountability Office, taxpayers who could itemize but chose not to ended up overpaying by $450. Don't be one of them.
19. Give wisely
The time is always right to do the right thing.
--Martin Luther King Jr.
Granted, Dr. King did not have money on his mind when he spoke these words. But they also ring true in your financial life, since giving back is always the right thing. Still, there are more right and less right ways to do it.
Look beyond the headlines. It's fine to give money to disasters like the tsunami, but don't forget about smaller charities that go wanting.
Don't give over the phone. Telemarketers often take a cut of 50% or more.
Focus. Identify a cause that really speaks to you. Then devote most of your energy and charitable dollars to the organizations that best support it.
20. Keep money in its place
A wise man should have money in his head, but not in his heart.
--Jonathan Swift
People who say they value money highly report that they are less happy in life than those who care more about love and friends. Enough said.