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Smart folks often make silly mistakes in terms of investing. Part of the reason for this, I guess, is that most people do not have the time to learn what they really need to know to make good decisions.

Don’t Forget to Diversify

The standard stock market return is 10 percent or so, but to earn 10 percent you need to own a broad range of stocks. In other words, you have to diversify.

To make money on the stock market, you need around 15 to 20 stocks in a variety of industries. (I did not just make up these figures; the 15 to 20 range comes from a statistical calculation that several upper-division and graduate finance textbooks explain.)

Have Patience

It is important for investors to have patience. There are going to be many bad years. Many times, one awful year is followed by another bad year. But with time, the great years outnumber the bad.

They compensate for the awful years too. Patient investors who remain in the market in both the good and bad years nearly always do better than people that try to follow every fad or buy last year’s hot stock.

Invest Regularly

You might already know about dollar-average investing. Rather than purchasing a set number of shares at regular intervals, you buy a regular dollar amount, such as $100. If the share price is $10, you purchase ten shares. If the share price is $20, you purchase five shares. If the share price is $5, you acquire twenty shares.

To make dollar-average investing work with individual stocks, you might want to dollar-average each stock. In other words, if you’re buying stock in IBM, you have to buy a set dollar amount of IBM stock each and every month, each quarter, or whatever.

Do not Ignore Investment Expenses

Investment expenses can add up quickly. Small differences in expense ratios, pricey investment newsletter subscriptions, internet financial services (such as Quicken Quotes!), and income taxes can quickly subtract tens of thousands of dollars from your net worth over an entire lifetime of investing.

Investment expenses may add up to really big numbers when you realize that you could have invested the funds and earned interest and dividends for years.

Don’t Get Greedy

People today make all sorts of foolish investment decisions when they get greedy and pursue returns that are out of line using the average annual returns of the stock market.

If a person tells you that he has a sure-thing investment or investment strategy that pays, say, 15 percent, do not believe it. And, for Pete’s sake, don’t buy investments on a shell company or investment advice from that individual.

Do Not Get Fancy

For many years now, I’ve made the better part of my living by analyzing complex investments. Nevertheless, I think that it makes most sense for investors to stick with very simple investments: mutual funds, individual stocks and shares, government and corporate bonds, etc.

To add to these basic investments, ask an investment specialist about merge companies and financial mergers.