The 80/20 Rule and Investing
You are probably familiar with the Pareto Principle, also known as the 80/20 Rule. It states that 80 percent of your results will come from 20 percent of your efforts. And this applies to investing as well as most other endeavors. For instance, 80 percent of your gains will likely come from 20 percent of your investments.
I also believe it applies to what I do in the investment world: short-term trading. I trade options and futures, but I don’t use all of my money for this. My wife and I have 80 percent of our investment money in long-term assets. She handles those investments while I get to play with the other 20 percent in the short-term.
How you diversify your portfolio also goes hand in hand with the 80/20 Rule. You should not have all your money in one stock, one investment vehicle, one market, or being handled by one firm. Look at how many people put all their money with Bernie Madoff and lost it.
[Ed. Note: Investment expert Rick Pendergraft and 8 of his colleagues will be revealing their top investment strategies this June. Find out how you can learn their secrets to making a fortune in today's market right here.]
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