Why 90% Of Investors Can't Compete With The Index?

After hosting over 5,000 hours of Spaces, I’ve learned why over 90% of investors underperform the index.

It’s because they overanalyze and don’t make quick decisions.

Rules of thumb are crucial for making accurate, split-second decisions.

Here are 10 investing rules of thumb I use daily:

1. The 5% Rule

No more than 5% of your portfolio should be in a single company.

Above 5% exposes you to too much risk.

There are plenty of great companies out there.


2. The 10/10/10 Rule

Before making an investment decision, ask yourself:

"How will I feel after 10 minutes?"

"How will I feel after 10 months?"

"How will I feel after 10 years?"

You'll have your answer.

This is a great rule for any big decision you make in life.

3. Rule of 72

This calculates how long it'll take for your investment to double.

Take your expected rate of return and divide it from 72.

72 / 10 = 7.2 years to double.

72 / 9 = 8 years to double.

4. Rule of 144

Similar to Rule of 72, but this shows how long it'll take to 4x your investment.

At an 8% expected return...

144 / 8 = 18 years to 4x your money.

5. The 100 minus your age rule

Sometimes referred to as the 120 minus your age rule.

The answer determines how much of your portfolio should be in stocks vs bonds.

The younger you are, the higher the percentage of stocks you should own.

If you're 20, you should be 80% stocks.

6. 5/25 Rule

When to rebalance your portfolio...

Looking at large asset classes, if they move 5% off the target line in either direction, it's time to rebalance.

For small asset classes, if they move 25% in either direction, it's time to rebalance.

7. The 5-Year Rule

Don't invest money you expect you may need within 5 years.

The stock market is volatile, and to ensure success, you need to play the long game.

8. The 8-10% Rule

If you look at the history of the stock market, it has returned ~8-10% over its lifetime.

Account for average inflation of 3%, and you're looking at a net return of 5-7%.

That's a pretty solid track record of success.

9. The 3-6 months Rule

Always keep at least 3-6 months of cash or cash equivalents saved up in case of emergencies.

The last thing you want to do is have to sell your investments and interrupt the compounding.

10. The 10/5/3 Rule

These are the historical average rates of return for stocks, bonds, and cash equivalents.

Stocks - 10%

Bonds - 5%

CDs, HYSAs, etc. - 3%

There you have it!

My top 10 rules of thumb for making split-second decisions as an investor.

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