General rules
No fixed income. Fixed income yields today are minimal. As I write this on 6/3/21, the 10-year treasury is yielding only 1.61% and the 20-year treasury is yielding 2.22%. Corporate bonds are not much better. Equity returns always higher, even when fixed income returns are higher. The best fixed income investment is to pay off your house and car. If you are in or approaching retirement and need stable cash flow, buy 100% equity real estate. Cap rates for good very commercial tenants are in the 6-7% range today. Single-family homes can yield 6-7% as well, and they will probably appreciate at 1-2% a year. Fixed income has no place at all - think about the inheritance you want to leave behind, too!
Timing the market is difficult. Knowing valuations can help, but cheap markets can get cheaper and expensive markets can get more expensive. Bottom-up assessment on a stock by stock basis is the best way to form a view. In light of this difficulty, it is best to just DCA (dollar cost average) in whether market going up or down or flat.
Avoid complex products. Call overwriting, downside protection, portfolio insurance, annuities and various forms of life insurance - these are all scams. These products are laden with fees - often with fees on top of fees - and generally present a HUGE conflict of interest between the seller and purchaser.
Avoid paying fees on top of fees. A funny refrain that applies in investment management: you get what you do not pay for. It is OK to pay an advisor, but the main value is so that you
Have someone to talk you off a ledge in a crisis and to protect you from irrational exuberance when things are going well
Think your investment manager an outperform the market over a long period of time due to some unique characteristics (e.g., avoid big drawdowns / knowing when to size up). This proved to be a big deal doing into and coming out of COVID. Even 1-2% annual outperformance over a decade makes a HUGE difference
You simply do not want to deal with managing your own money. This could be for various reasons. Maybe you are a busy professional and your time is better spent on career or with family, etc., rather than thinking about investing all the time, like I do. I also think it can be helpful to have an emotional firewall between you and investing decisions. Having a lot of money to invest is a good problem to have; an investment manager is a solution
Help you in situations of significant importance (e.g., selling a business, reducing concentrated ownership in one security over time)
In any case, it is important to understand what you are paying and weigh it against the value you are getting. I do not understand why people pay advisors to just buy mutual funds or ETFs...aside from paying two layers of fees, there is nothing really valuable the advisor is doing.
Consider goals. Compounding in the low teens is fantastic over a lifetime. There is no need to stretch for more. Compounding in the high teens over a lifetime means you will be a billionaire. The difference between low and high teens is massive, but the risk level difference can also be massive. Do you want to be a billionaire to have a high chance at being in the $10mn to $100mn range?
Specific tricks
In the long term, a company's earnings growth will correlate to stock performance. In the long term, revenue growth will be similar to earnings growth. Therefore revenue growth will drive stock performance. Do not get too hung up on valuation, share counts, capital structure, industry competition or even margins. All these elements are important, but revenue growth is the most important. Margins usually take care of themselves and if competition is really bad, you probably won't have great revenue growth (or you will and then everyone in the industry does well).
Minimizing drawdowns and correlation is more important than you think (even if you have a long term orientation). Compounding returns is what drives performance. Being down -40% then up 40% means being down -16% in sum, not flat! This is why minimizing correlation in the names you own and the volatility of the portfolio is critical. Volatility in an individual name can be an opportunity...but only if you can rotate into the volatility by selling something that has outperformed for something that has underperformed. Technology and experience helps in terms of minimizing volatility and correlations, but common sense does too. This is why I do not like having effectively the same bet on.
Tails are fatter than you think. This bullet point merits a whole book. In fact, Taleb has written many books on this topic. Suffice to say that seemingly very unlikely things happen more frequently than we would ever expect in finance. We must use this principle to strengthen our investing protocol.
If you want > average performance, you have to do things differently from the masses. You have to be differentiated and correct in your views and methodology.
Always avoid: companies with a lot of debt, companies with significant exposure to commodity prices (e.g., oil, chlorine), financial institutions of any kind (banks, lenders)
FAQs
Q: What do you think about [Insert Popular Stock Here that has gone up a lot recently]?
A: It is probably a short
Q: What do you think about Bitcoin?
A: IDK. Allocate a certain, small % of your account to it
Q: Is the market [housing or stock market] going to crash soon?
A: Probably not, but if it does, we should probably keep dollar cost averaging in
Q: What do you think about [Insert Asset Class here]?
A: Whether crypto, real estate, stocks or Pokemon cards, I think all assets are correlated. I prefer productive assets over store-of-value type assets
A few more detailed ideas