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Diversification Creates The Efficient Portfolio
- Diversification reduces uncompensated company-specific risk and improves return per unit of risk.
- The market (total-cap-weighted global equities) is the efficient diversified portfolio that sits on the efficient frontier.
Don't Try To Time Markets
- Avoid trying to time the market because no one can predict it consistently.
- Focus on long-term, persistent investing instead of short-term market timing attempts.
Prioritize Low Investment Costs
- Keep investment costs low because small fee differences compound into large wealth differences.
- Prioritize big fee savings over obsessing about negligible basis point differences between competent index funds.