I write this because it should be obvious but is not.? I grew up in a house where my Dad earned an average income from his business, but my Mom took around 10% of the income and invested it half in utilities and half in growth stocks.? As my Mom said to me, “My utilities are my bonds.”

Bright lady; my first teacher in investing.? She beat the market for four decades plus.

But the main thing that she did right was to spend less than my Dad earned.? This is critical.? You can’t build capital unless you set assets aside.? This is the most important of the rules.? You must consume below your means, and invest the surplus wisely.? I remember many ways in which she said “no,” to a variety of expenditures.? We didn’t live below the appearances of our neighbors, but we were one of the last on the block to get a color TV.? Good thing, TV is such a waste of time — and I wasted a lot of time there when I was a kid.

The second main thing that she did right was take moderate risk.? Looking at her portfolio, one might ask, “Why so many utilities?”? Or comment, “A lot of boring GARP-y stocks.”? I contrast her with my paternal grandfather, who retired in 1966-7, and sold his business to his two sons, and then lived off the interest income from CDs, etc.? He took no risk in his retirement, though he took moderate risk as a businessman, and as a pool player.? (Rumor is he was Wisconsin state champ at some point… but I can’t prove that.? I played him a kid, and never won.? My Dad, who learned from him, I beat only once, and lost many times to him.)

An investor in CDs will get what he contracted for, absent default.? The investor who is like my Mom will have a more jagged trail, but will earn more.? Even in the late 70s and early 80s, my Mom did not lose confidence in her strategies, even as Grandpa earned 15%/year on his CDs.? Her time was yet to come.

My Mom would hold stocks for 10 years on average.? So long as you pick companies with a sustainable competitive advantage, you will generally do well over longer periods, should you have the fortitude to not trade frequently.

So, my third point is don’t be an aggressive trader.? Yes, have trading rules, but don’t try to make money in the short run.? Try to make money in the long run.

My fourth point would be “do it yourself” if you can.? (Yes, I know I run money for others.? I will say what I believe even if it costs me business.)? But that means you have to learn a lot, like my mom, or me, or my father-in-law, three people all mostly self-taught, with different investing philosophies.? Good investing is like running a business on the side.? It is not easy.

My fifth point is pay attention to taxes, but don’t let taxes dominate your decisions.? There’s a balance here, and for my clients, I try to generate taxable losses on net, while letting winners run.

My sixth point would be that income in investing is important, but not for the reason you might expect.? Income is important because it motivates reinvestment opportunities, not consumption opportunities.? When you are older this changes a little, but in many cases it is smarter to focus on total return, and consume from capital rather than have every stock try to produce income.? That said stocks that pay dividends tend to do better than those that don’t.? 28 of the 33 stocks in client portfolios (of which I am a client as well) at present pay dividends, and the portfolio as a whole has an above-market dividend.? Reinvesting income compounds your gains in new ideas that were hopefully more promising in the new environment.

The seventh point is study investing to the point where you have an intelligent strategy, and once you have that, don’t abandon it.? Too many people flit from one hot idea to another, but never end up with a coherent strategy that that employ for decades.? Even if I close down my investment business, I will keep applying the same investment strategy for myself, it has worked well for me, even if at present it has been middling for clients.

Every investment strategy goes through periods where it works poorly.? That’s life.? If you have a strategy that always works well, that means:

• You haven’t run it long enough.
• You’re not running enough money.
• You’re not taking enough risk.

Survive through your bad times, and prosper during the times where your intelligent strategy is paying off.? Patience is a virtue in investing for the most part.

Okay, there are seven points from my experience, from my Mom, and from my late Father-in-law.? None of us trained to invest in a formal way, myself included.? (Yes, I received a CFA Charter, but I knew far more than the syllabus did before I took the exams.? The academic stuff I learned was not a help when I was in graduate school.)

An eighth point to consider is that money matters temporally.? Eternally, no, it doesn’t matter.? No one can buy Heaven, as Psalm 49 points out.? But you can use your wealth to aid those who are trying but failing.? That’s important.? As John Wesley put it, “Earn all you can, save all you can, give all you can.”? I am fairly certain that the first two were honored more than the last one, but Wesley was correct there.

In general, being willing to give also correlates with prosperity.? Doing well means more than becoming rich; it means living your life for the good of others.? We should not live for ourselves.? Money is merely a means; it is not an end in itself.? Use your money to the best end that you see.? Loan money to a poor but honest friend at no interest.? You will do something really good there, and God will bless you.? I have done that many times in my life, and it has paid off, though I can’t prove that empirically.

One more note, when you are a giver, you become more careful with your own spending.? You begin thinking more broadly about the world, and realize there is little advantage to most luxuries.? If you have enough, good.? Even Warren Buffett (No Christian he) likes his Burgers and his Coke.? He does not look to luxury in consumption, even as he owns jewelry stores.

He is a bit of a miser, but as he has aged, he has handed over most of his wealth to the Gates Foundation.

In closing, take care over your saving, investing and giving.? They are all important aspects of how those who are improving their financial well-being improve their lives.