Key Investment Principles

- Invest using low cost index style exchange traded funds and/or mutual funds

• Research conducted by Standard and Poor's proves that over long periods of time index funds outperform the majority of actively managed stock funds by a wide margin. (explore more about passive vs active investing)
  

- Invest in asset classes only if valuations are attractive relative to historical long term trends

• Analyze stock valuations based upon long term (usually 10 year) normalized earnings and book values. (see chart of S&P 500 normalized PE ratio going back to 1900)
  

• Analyze bonds based upon long term interest rate, inflation, and exchange rate trends.
  

• Analyze commodities based upon long term supply and demand trends along with currency considerations.
  

• Analyze real estate based upon long term supply and demand trends along with net cash flow considerations.
  

- Analyze long term asset valuation trends in various currencies including gold as a currency

• Use gold and other major currencies when analyzing long term valuation trends to filter out inflation and exchange rate distortions.  (This is especially useful when analyzing stock market valuations)
  

• Recognize that paper assets and hard assets typically move in opposing multi-decade boom/bust cycles where stocks underperform for long periods of time (1905-1920, 1929-1954, 1969-1982, and 1999-?) while hard assets outperform. (see chart of the S&P500 and gold to see these cycles in history)
  

- Diversify into as many uncorrelated asset classes as valuation analysis will allow

• Diversification into uncorrelated assets is an excellent way to improve overall portfolio performance while reducing risk.  (For example: during the 2008/2009 financial crisis Treasury bonds and gold gained in value while stocks, corporate bonds, real estate, and industrial commodities lost value). (see chart of asset class correlation)