My rules to investing

Disclaimer: These are my own personal rules, not yours. You can use them if you like, but keep in mind I am not providing any opinion or advice whatsoever (legal, securities, or otherwise). I am not a financial adviser, stock broker, or mutual fund salesman nor do I hold out to be. Whatever you decide to do, you do at your own risk and cannot hold me liable.

Generally, all unsecured investments are risky to the creditor.  No risk, no reward. The solution? Simply manage the risk.  I always assume that it is just a matter of time before an investment fails in one way or another (either it was a scam, or shut down by securities regulators, or the deal falls through, or the exit strategy doesn’t materialize, or the principles screw you… really anything can and does happen).

Creating a set of rules helps reduce risk, and thus increase the return. The number one rule is: don’t loose the initial capital.  So my rules are focused on capital preservation with a view for high returns.

Definitions:

Program: One particular investment.

Plan: Many programs combined together in a systematic approach.
The Rules

1) Focus on the overall plan, not one program.

2) Some programs WILL fail. It will suck, but expect it and plan for it accordingly.

3) Anticipate a continual replacement process as some programs go bad.

4) Divide up the portfolio into fractions for each program. Set a limit on how much goes into any one program. Example: No more than 10% of total funds into one particular program. Go wide and shallow.

5) Wide means: 10+ different programs. Build the list up to ten or more good programs.

6) Shallow means: NO BIG FRACTIONS into any one program! Stick to the limit. Stay disciplined.

7) Choose existing programs only, 6 months or older is good, 12 months or older is better.

8)  Tend towards programs that earn a return WITHOUT the necessity of sponsoring or referring others.

9) Get paid back often, preferably weekly or monthly.

10) Recoup principle from any one venture as soon as possible to reduce risk of loss.

11) Take back principle when it has doubled or more.

12) After principle is recovered, reinvest half the proceeds each cycle thereafter

13) Don’t let large amounts accumulate in any one program. Rebalance with growth of the plan.

14) Rebalance by either redistributing capital equally across existing programs, take out and save, convert to physical gold, or add a program to the plan.

15) Avoid capital appreciation, stick with cash flow. CASH FLOW IS KING!