Sick to death of it all? Well you could be forgiven for being thoroughly fed up with all forms of investment. From failing endowment policies, duff pensions and poor returns to shoddy shares in tacky tech stocks - why should we bother any more?
The answer is that we have no choice. We cannot afford to wait, and doing nothing certainly won't solve anything. So what is the answer?
Well, in my view, a few clear rules for investing should at least give us the discipline to focus on what we need to do and when to do it.
- Don't invest!
That's right - don't buy any shares or investments, ISAs or funds - that is, not until you have prepared yourself. The first thing to do is to sit down and do some good old fashioned planning and organisation.
The questions you have to ask yourself are what do you want to achieve and by when? Once you know that, then you can work out how to get there.
- Avoid the fashion fads
Don't believe in myths. There are siren calls every day to buy the latest "stock-du-jour". In my view stock of the day makes good soup of the day - it has nothing to do with investors.
Ask most stock punters and they will tell you that they made some profits on a few stocks, but that was discounted by their losses, which amounted to far more than their gains.
This is not investing, but rather something closer to the "2.30pm at Aintree". There is nothing wrong with the occasional punt but this is generally not how you build up your wealth in the long term.
- Asset Allocation
Good investment is a blend of investments covering all types of asset classes. For example, you need to involve property, cash and bonds, as well as shares.
This diversification ensures that you can spread your risks and then adjust your weighting in each area as your grow older and your willingness to take risks decreases.
- Compounding & the Rule of 72 The hidden secret of investment is the power of compounding both interest and dividends earned.
You will be very surprised how they build up over the years. To prove this there is the rule of 72 which tells you how long it will take to double your money. Just divide 72 by the annual return you want from your money.
If say we wanted 7% per annum, then the answer will be 10 years. So if you could ensure that you doubled your money every 10 years, I think most of us would be in a happier state by the time we retired.
- Timing the market
Another myth. You will only know if it was a good time to invest afterwards - the rest is conjecture and guesswork.
Between 1987 and 1999 (3000 trading days) you would have earned a return of 14.9% per annum if you had been fully invested.
But if you had missed just the 40 best days out of the 3000, you return would have dropped to a paltry 4.8% per annum! It is time in the market that is vital - not timing the market.
- Research
There has never been so much information around about companies. Seek it out and check it, but be careful - if it sounds too good to be true, it probably is.
Remember you can look at a company's Report and Accounts (I start with last year's to see if anything the Chairman wrote has actually come true), try the product or even visit the company. Common sense tells you a great deal about a business.
- Tips and recommendations
Be wary of these. Ask yourself where they have come from and why you are being told them. The company's own broker may put out a recommendation and not unsurprisingly, these are rarely pessimistic.
Sometimes the views are institutional and not for the retail market, unless you have the odd million lying around, and if the source is an unregulated firm then be very wary.
The magazines and press can be helpful, but the views can be quite out of date by the time you get to read them.
- Sector and peer group comparison
Most companies have similar competitors in their area to which you can compare them. Use these to compare valuations, management products and their track record.
If your stock is out of line with the others in its group, then questions should be asked.
- Reason to invest
Always invest with a purpose. It may be short or long term but you should be able to point to the original case as to why you bought that stock, bond or fund. When that reason has occurred, make your next decision.
For example, you may be awaiting news on a specific contract or the company's results. Set your target and if the event or news has not occurred then it may be time to get out.
Don't worry if you want to buy something to hold for a long time and just see steady growth - it's still a perfectly good reason.
- Look for consistency
Whether a fund or stock, look for a consistent track record of performance, product, management and development. If something goes awry then this is your first warning. Oh Marconi!
- Don't be greedy
We have a phrase - leave something for the next person. If the share is too expensive, no one is going to buy it from you.
Either sell and take your profit, or take some of your profit, and set another target.
- Always set a stop loss
If your investment does go down, and breaks through this, then at least you have cut your losses.
The percentage varies according to the size of the company - the smaller the company, the larger the percentage. For a FTSE 100 company a figure of 15% should do.
We can take a lot of the risk and hype out of investing by taking a longer term view and through careful planning. The short term attitude tends generally to make investors poorer and stockbrokers richer.
We can still enjoy investing and still have the odd punt, but let's never confuse the vital need to build up our family wealth with a fun day at the races.
Tuesday, 17 September, 2002, 09:39 GMT 10:39 UK 
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