Invest for cash flow, not just price gains

If your plan only works when you sell at a higher price, a bad market can force your hand. When your holdings pay you every month, you can let prices go up, down or sideways and keep collecting.

Robert Kiyosaki, Rich Dad Poor Dad

Spend the income, protect the principal

Live off what your portfolio pays you and leave the money that produces it alone. Principal is the goose. Income is the eggs.

Kevin O'Leary

Favor assets that pay you

Over long stretches of market history, dividends have made up a large share of total stock market returns. Owning things that pay you rewards patience instead of perfect timing.

Kevin O'Leary

Reinvest while you build

Until you need the income, put it back to work. Reinvested distributions buy more shares, which pay more income, which buy more shares. That is compounding doing the heavy lifting.

Diversification is the only free lunch

Spreading money across assets that do not move together can lower risk without giving up much return. No other tool does that.

Harry Markowitz

Aim for 10 to 15 uncorrelated income streams

Stocks, real estate, energy, international markets and cash each respond to different forces. When one has a rough year, the others can carry the load.

Ray Dalio

Cap any single bet

Keep any one stock to about 5% of your portfolio and any one sector to about 20%. One company or one industry should never be able to sink the whole plan.

Kevin O'Leary

Never depend on one company, country or currency

Anything can happen to a single company at any time. Broad index funds and a mix of US and international holdings spread that risk out so you do not have to predict who wins.

Expect any asset to fall 50 to 70% someday

Nobody knows when. Build a portfolio you can live with on the worst day, not just the best one.

Ray Dalio

Hold enough cash that you are never forced to sell

A cash reserve of 5 to 10% covers living costs and lets you buy when prices are on sale. Cash is king in a crash and a drag when held too long, so keep it purposeful.

Protect yourself against what you do not know

You would not drive a new car without insurance. A cash cushion, diversification and, for some investors, hedges are the insurance on your portfolio.

Jim Rogers: "One has to be hedged in case one is wrong."

Rebalance on a schedule

Trim what has grown past its target and add to what has fallen behind. It forces you to sell high and buy low without having to guess.

Do not try to time the market

Add money every month on the same day, in tranches, no matter what the headlines say. It takes the emotion out and smooths your average price.

Think in decades

Buy with the intent to own for years. Focus on what a great asset will do, not when it will do it.

Warren Buffett

Tune out the noise

Check your account only as often as it takes to stay calm. Ignore the news cycle and the hype. Use volatility to buy at good prices, then ignore it once you own.

When in doubt, pick the lower fee

Fees compound against you just like returns compound for you. A fraction of a percent each year adds up to real money over a lifetime.

Hold more than a year

Gains on investments held over 12 months are usually taxed at lower long-term capital gains rates than short-term gains, which are taxed like ordinary income.

Understand return of capital

Some income funds pay distributions treated largely as return of capital. That is generally not taxed when you receive it. It lowers your cost basis instead, which pushes the tax out to when you sell.

Know the 0% long-term gains bracket

Below a certain level of taxable income, long-term capital gains can be taxed at 0%. For married couples filing jointly it is close to $100,000, and the IRS adjusts it every year. Planning sales around it can save real money.

Let your lifestyle grow slower than your income

The gap between what you earn and what you spend is the fuel for everything else. Pay no attention to the Joneses.

Be careful with debt

Debt takes away options, and options are one of the most valuable things you own.

Know your number

Figure out what you spend each month and what your portfolio would need to pay to cover it. A clear target turns investing from a guessing game into a plan.