Wealth

The New Rules of Building Wealth

Eight simple tips from the most trusted financial brains in the game

By: Chris Taylor, Photographs by: James Wojcik
[ Updated: Jan 4, 2009 - 2:50:43 PM ]

Mark Adamle remembers the exact moment when he strayed from the rules of investing. It was December 1999, the world was still giddy with dot-com millionaires, and he had just come into his tidy Christmas bonus. Who could blame him for reading a business-magazine article about which stocks to own for the next decade?

So half of his bonus went straight into WorldCom, and the other half into Lucent Technologies. You can guess how this story turns out. "I was smacked around pretty good," says Adamle, 47. "I thought I was a gunslinger, and I got burned."

That's when he rediscovered his humility, stuck to some core principles of investing, and got his portfolio back on the right track. After all, Adamle—a senior VP of Intersport, a sports-programming producer for networks like ESPN—had been a pretty good saver over the years, ever since marriage and his two kids entered the picture. Now, by sticking to his rules, and with the help of his financial planner, Ray Evans, he's been able to rack up solid 16 percent annual gains.

By opting for a long-term time horizon, improving his asset allocation, avoiding the turkeys with sketchy earnings reports, and keeping his emotions out of his investment choices, he's been able to secure his retirement and prepare himself for those upcoming college bills. "I've always been involved in sports, and in sports there's a win-or-lose mentality," says Adamle. "The same goes with investing...and no one likes to lose."

To help you win the investing game over the long haul, we sought out the wisdom of some of the most brilliant financial minds in the country—not just any mutual-fund managers, for instance, but individuals who collectively manage about $20 billion and consistently outperform their peers year after year. We asked each finance guru for one important rule that has guided him, and that you can bank on yourself. The result is a master course in investing. Class begins now.

Forget performance; look at fees
So you've done your mutual-fund screens, crunched the Morningstar ratings, and come up with the top performers. Now take all that data and throw it out the window, because it's not past performance but low fees that will likely determine your ultimate financial success.

"Any economist will tell you that in terms of predictive power, there's no comparison," says Mercer Bullard, founder of investment-world watchdog Fund Democracy and a visiting professor at Washington University in St. Louis. "In a given investment category, if you're to pick a single factor to go on, you're going to do better in a fund with lower costs."