A top rule for success

Article Excerpt

One of our main rules for successful investing is to spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities. If you follow this rule, you improve your chances of making money no matter what happens in the market. For example, manufacturing stocks may suffer if raw materials prices rise, but in that case your Resources investment will grow. Rising wages can put pressure on manufacturers, but your Consumer stocks will do better as workers spend more. If borrowers can’t pay back their loans, your Finance stocks will suffer. But high default rates usually lead to lower interest rates, which in turn pushes up the value of your Utilities stocks. Right now, it’s particularly crucial to avoid investing too heavily in the Resources sector. Up until a few years ago, Resources stocks were among the worst performers. But thanks to soaring energy and metal prices in 2005,…

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