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Aphorisms by Jonathan Hoenig (SmartMoney.com) Moderation is the key in managing a portfolio. You can be a bull or a bear without being an animal. The long-haul crowd will tell you your losses exist only on paper. What do they think dollar bills are printed on ? Rule No. 1 in trading: Resist your natural urge to make a bad decision. Regrets are an investor's worst enemy. When a trade doesn't go your way, dump it and move on. Sometimes the best trade is the one you don't make. Patience is a virtue in this market. While some investing ideas never grow old, a fresh look can also do wonders for your bottom line. Investing shouldn't be fun, socially responsible or tax-conscious. It should be profitable. Losing streaks are inevitable. It's how you rebound from them that counts. Panicking is never a good idea. But fighting the market is a surer path to ruin. The best way to make money in the markets is to ignore the story and focus on the action. Just because I get bucked off once doesn't mean I won't remount a trade that still looks promising. Don't try to catch every bottom or top - the real money is made in the middle of a trend. The best thing you can do for the winners in your portfolio is nothing. As for the losers ... Sometimes, the best investment to make is to buy a book and head to the beach. It's far easier to sell winners than losers. But it's wiser to sell the losers. Trying to time market tops and bottoms is usually a losing game. As cliché as it may seem, fighting the tape is a battle you can't win. Falling in love with any particular stock will only lead to heartbreak. In order to let your winners run, you need to keep open a profitable position. Getting your financial house in order always pays emotional dividends. There's no shame in cutting your losses. It's the right thing to do. All investors find themselves in a hole. The trick is learning how to get out. Good technique gives investors a chance to profit even when they're early to a trade. It's not just knowing what stock to buy. It's the follow-up. When you have it, you don't need it. When you want it, it's usually not there. Why the market dropped doesn't matter. Focus on positioning yourself for what's next. Your heart rules emotions. Let your brain decide what stock to buy and sell. We're inundated with stock picks. But the successful traders look beyond the noise. Unlike with gambling, investing allows you to mitigate risk through prudence. Active trading is smart when you take action to reduce exposure to losing trades. Want to know the secret to deciphering financial news ? Ignore most of it. There are many reasons to dump a stock, and many more to keep the relationship alive. Risk is an inherent part of investing. It's how you identify and manage risk that counts. Market downturns are inevitable. The key is how you cope with them. Instead of trying to profit from short-term volatility, exploit big trends over the long haul. A longtime loser is unlikely to become an overnight winner. Learn to cut your losses. Skilled investors act on the ideas they love, not the ones they like. Close the books and turn off the TV. The only way to learn about investing is by investing. It takes a split second to lose years' worth of gains. Protect yourself at all times. An all-or-nothing approach to investing in today's market is a losing bet. Good investors know that it's smart to stay happily married to winning trades. A big mistake is hanging on to losers. A bigger mistake is selling when they finally rally. Best traders don't just take risk but mitigate it too. Today's losers can easily become tomorrow's winners.

Cumulative Variance© !C Chart Center.
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Fifth Edition William F. Sharpe Gordon J. Alexander Jeffrey V. Bailey