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Not-So-Secret Rules of Investing Success

Roger Wohlner

I should really be charging a small fortune for this advice, but what I'm going to share isn't actually a secret. I'm continually bombarded with pitches from folks who want me to subscribe to their newsletter that is guaranteed to deliver big investing profits. My question is always, "If this is so good why are you sharing it with me for this absurdly low price?" Note I'm not knocking all investment newsletters or services, just those that make clearly outlandish claims of success.

Take at look at hedge fund performance. A piece on CNBC the other day that said that the average hedge fund was underperforming the S&P 500 index by a wide margin in 2012. While some of these funds do have solid long-term track records, others do not and they aren't shy about charging hefty fees.

In my opinion there are few, if any, investing secrets.

Here are a few keys to being a successful investor based upon my experience as a financial adviser:

Persistence. Successful investing is a continual, lifelong process. Many of the "Nifty Fifty" stocks of the late 1960s did not turn out to be the "one-decision" stocks they were touted to be. Investors need to stay on top of their holdings, the world around them, and their own unique situation. Adjustments in one's overall portfolio and in individual holdings are warranted from time to time.

Understand your risk tolerance. It sounds great to say I don't care what happens to the markets in the short-term as long as you can ultimately practice this. Case in point were the many investors who tragically sold out of their equity holdings near the bottom of the last market downturn only to see the market head into a tremendous rally since March of 2009. These folks booked significant losses and in many cases never got back into the market to recover them.

Invest in line with your goals. Your investment portfolio should be driven by your financial goals and your timeframe to achieve those goals which should come together in the form of a financial plan.

Monitoring your individual holdings and your overall portfolio is vital. Even index funds change, just witness Vanguard's recent change of index providers. Certainly actively managed mutual funds need to be monitored as do investments in individual stocks and bonds. I don't encourage market timing or even frequent trading, but there are no "set it and forget" investments. On top of that, it is critical to make sure that your overall portfolio is in line with your investing and asset allocation plan.

Commitment is vital in terms of making investing a priority. Sometimes it's difficult to fit monitoring investments into busy lifestyles. Like anything else, if your financial success is important to you, it is vital to commit the time required.

Roger Wohlner, CFP®, is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, Ill., where he provides advice to individual clients, retirement plan sponsors, foundations, and endowments. Read more about Roger here.

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