Lists can help organize your thoughts. I have created them for everything from rules for investing to financial phrases to avoid. As someone who has spent decades thinking about money – saving it, investing it and spending it – I have come to recognize several fundamental truths about money that I have compiled into a list:

Investing Is Both Simple and Hard: The basic premise behind successful investing is easily understood: “Invest for the long term, be diversified, watch your costs and let compounding work its magic.” But following through can be challenging.

Humans are plagued by an inability to just “sit there and do nothing.” Failing to do so leads to costly errors and loss of capital that erode returns. Understanding what is required is very different than being able to perform, regardless of circumstances, for decades on end.

Which leads us to rule No. 2:

Behavior Is Everything: The inability to manage emotions and behavior is the financial undoing of many. To paraphrase William Bernstein, “the extent you succeed in finance is based on your ability to suppress your limbic system. If you can’t do that, you’re going to die poor.”

Even the greatest stock pickers will underperform if unable to control their emotional impulses. Allowing emotional hot buttons to get pressed is how people go wrong in investing. There are no shortcuts, secrets or get rich quick schemes that work, not even those three-day workshops that promise to reveal the secrets of the ultra-rich for a “nominal” fee.

Moderation In All Things: Think of the majority of the assets in your portfolio -– hopefully a diversified, global mix of passive index funds -- as the basic meat and potatoes of investing from which you can add seasonings, herbs and vegetables. Want to do some early stage investing in tech start-ups? Maybe some real estate speculation? Perhaps a bit of private equity investments in non-public businesses? Maybe even a fun trading account?

I don’t have a problem with any of that as long as it meets two conditions. First, you should understand that the odds of success are against you. Many billions of dollars are aggressively competing in the same space for returns. The professionals are always searching for an edge, and even with one, there are no guarantees of success.

Second, it should be a smallish chunk of your liquid net worth, perhaps about 5% to 10%. That is enough to provide you a little fun and intellectual stimulation. Some might even discover a knack for such investing. But the amounts should be small enough that if the investment doesn’t work out it won’t affect your financial plan.

Risk and Reward Are Inseparable: Risk is best defined as the probability of your returns differing from your expected outcomes. The problem is that many investors want better-than-market returns while assuming minimal risk. But returns are a function of the risks assumed.

Risk-free U.S. Treasuries yield almost nothing. To do better, own equities. But that adds volatility to your portfolio. If you seek higher returns, you can add low beta stocks that have the potential to do better – or worse – than the market as a whole.

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