Michael O’Higgins’s investing rules

Several smart affluent lady friends say they need help to manage their money - they don’t have time, they don’t have the knowledge (even the one with the MBA) and/or they “trust” their financial advisor. I understand the lack of self confidence for taking full responsibility for your financial affairs, but it just isn’t that difficult or time consuming to do a reasonably good job on your own. Look at all the guys who do this for a living - not a rocket scientist in the bunch.

There are lots of really smart folks out there who share their ideas and strategies. Michael O’Higgins’s investing rules are well publicized. He doesn’t require you to give him all your money to hear the “secret” formula. Timewise - this strategy takes about an hour once a year or so.

1. Get paid for taking risk. - Throughout most of financial history, investors have been paid handsomely for taking the risk of owning stocks. If the earnings yield, also known as the earnings/price ratio, is below the yield on AAA Corporate bonds, avoid stocks and put your money into long term 0% coupon U.S. T-Bonds.
2. If the price of gold is rising, don’t buy bonds. - The price of gold has correctly predicted the course of long term U.S. interest rates in 26 of the last 32 years. If gold’s price has risen over the past year, avoid bonds.
3. When buying stocks, stick to the “Dogs of the Dow”. - The 10 highest dividend paying DJIA components have consistently beaten the Dow by wide margins with below average risk.