Three-decade markets veteran reveals his simple rules for smart investment

Even professionals, with all of their complex programs, aren't great at timing markets, Bob Pisani says. Source: Getty

Bob Pisani has been reporting on financial markets for US money channel CNBC for the past 29 years, and is one of the most recognisable faces in Wall Street media as well as an award-winning business blogger. So, he’s seen a few things in his time!

Now, he’s revealed the six investment principles that he believes work for everyone, no matter what capital you may have to work with. You can read his thoughts in full here, and we recommend you do because they’re set out in simple terms for easy reading. But in short, these are some of the ideas Pisani says he’s seen work over and over again in his almost-three decades of watching markets.

Understand compound interest

The beauty of compound interest means that you make money on your money without doing very much at all, other than ensuring you are always aiming for the best return on your capital. And the sooner you do it, the greater the benefit over time. “Don’t leave money on the table by waiting to invest your money,” Pisani says.

Don’t try to time the markets

The investment veteran advises putting the same amount of money into purchasing stocks or other traded assets every month – the fancy name for this concept is ‘dollar cost averaging’ – whether the markets are up or down. Yes, it means you’re sometimes buying when prices are higher, but you’re also buying when they’re lower – and it means you don’t miss out on the good times by getting your timing wrong.

“Investing in the S&P over the last 20 years produced an annualised return of 7.2 percent but missing just the top 10 days in those 20 years cuts the return in half, to 3.5 percent,” Pisani explains.

Invest as much as you can afford

Invest as much as you reasonably can, make sure you’re doing so as tax-efficiently as possible (in Australia, superannuation contributions are one way of doing this) and always keep an eye out for offers to match your money – such as the Australian government’s co-contribution for low- and middle-income earners.

On top of all of the above, smart investing involves keeping your investment plan simple by investing in what you know and understand, Pisani says, and then sticking to that plan over the long term.

Do you agree with these principles? What would you add?

Important information: The information provided on this website is of a general nature and for information purposes only. It does not take into account your objectives, financial situation or needs. It is not financial product advice and must not be relied upon as such. Before making any financial decision you should determine whether the information is appropriate in terms of your particular circumstances and seek advice from an independent licensed financial services professional.

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