TRUE Traits for Successful Investing

When it comes to investing, the big decisions are driven by how much money to have in stocks, bonds, and cash. TRUE’s Traits for successful investing are listed below to help you allocate your money based on your long-term plan.

Trait #1: Try to have 4-6 months of cash on hand for emergencies.

Trait #2: If you need the money in the next 12 months, then it should be in cash. If you need the money to start a business in the next year, there is no sense in risking this money in the stock or bond market. We recommend keeping this money in a CD or Money Market Account.

Trait #3: You should never own enough of one thing to get killed by it or to make a killing in it. This rule boils down to managing emotions to avoid under and over-diversification. I have seen too many people working for a great company and having not only their salary reliant on that company, but they own more than 50% of their net worth in that company’s stock.

Trait #4: Almost all goals that have an exact dollar need and a time frame within the next seven years should be in bonds. Bonds work great for a specific time frame, with a specific dollar amount and a predictable interest rate.

Trait #5: Love stocks. Stocks are your long-term friend. Jeremy Siegel stated in his bestseller, Stocks for the Long Run, for every rolling five years since 1802 (1802 to 1807, 1803 to 1808, etc.) stocks outperformed bonds 71% of the time. Stocks beat bonds in 80% of the rolling 10-year periods, and essentially 100% of the rolling 30-year periods. That’s a solid record!

To top it off, dividends have grown at a compounding 5% rate since 1946. Much greater than inflation1.

Trait #6: You should ride your winners using a stop loss. When you find an investment that is outperforming the market, the most difficult decision is when to sell. If you set a stop loss to protect your gain, you take away much of the decision-making. (Remember that when an investment is outperforming the market, there is an invisible rubber band connected between that investment and the market. At some point, when you stretch that rubber band too far, it will snap back to the long-term average.) Therefore, having a predetermined selling discipline is important.

Trait #7: You should sell your losers. If you have a losing investment, one that is falling not because of a general market sell-off, but one that is underperforming its peers or its benchmark, then you should consider selling that position. It’s much better to ride momentum on the way up than to chase value on the way down. Plus, it’s a lot easier on your emotions and mental health.


We hope these general traits of good investors help you to make better decisions with your money. And if you don’t want to follow these rules yourself, then consider hiring a personal wealth manager to create a long-term plan to manage your investments for you.