Five investment rules to live by

By Glen Drysdale

For most physicians, managing an investment portfolio is about as much fun as a wet weekend even in the best of times. The 'no exit' war in Iraq, shocking oil prices, the tsunami, hurricanes Katrina and Rita and the massive earthquake in Kashmir all take their toll on the way we feel about the future and investments are all about the future. No wonder markets can't decide whether to go up, down or sideways. What you need, doctor, is some shelter from the storm. Here are a few investment rules that could save you some money and a lot of unnecessary grief.

Don't buy any stock (or mutual fund) blind. Never buy a stock you know nothing about. Ignore tips unless you do the research and know that the investment at least has the potential to be a good one. Go online and look up the company. Scan any news posted on the company's site. Do a Google search on the company and, if you like, on the executives as well. Go to the exchange site on which the stock is listed. There you'll find everything you need to know on the past performance of the stock. Check the price to earnings ratio (P/E) which will give you some idea of whether the stock is overvalued as is the case with shares that sell for many times what the company is actually earning. Sound onerous? Not at all, once you get the hang of it, it'll take only a few minutes.

Save brokerage fees. Most companies sell shares directly to the public. You may have to buy a single share to get in on the offer but once you do, simply contact the company directly. For many US stocks, go to www.netstockdirect.com.

Keep all of your dividends and other gains in your portfolio. You're in the market for a long time, not a good time, so make time work for you. The difference can be stunning. For example, an investment of $10,000 which just keeps pace with an average stock index — Standard's & Poor's, or the TSE, for example — might grow to around $75,000 over 25 years. If all dividends over the period are reinvested the return would be about double that.

Buy no-load funds. Many mutual funds have 'loads'. These are irritating charges that are deducted from your investment at the beginning, called 'front-end loads', or those that are charged when you cash in, 'rear-end loads'. There are funds out there that don't have the charges and, as long as they're good performers, they'll save you money. Also, remember to always ask for the management charges assessed to your fund. Typically these are about 1.6% but they can be higher — and they're often buried in your statements. They can usually be found in newspaper listings of funds, ignore them at your peril.

Guessing market swings makes you crazy. Markets go up and down, those who try to sell at the top and buy at the bottom find that they're no better at it than the experts — and the experts are notoriously bad at it. You're in for the longterm. Don't worry about the swings until you're ready to cash out.