Thread by @opinion

As someone who has spent decades thinking about money – saving it, investing it and spending it – @ritholtz has come to recognize several fundamental financial truths.

Luckily for you, he’s willing to share them: trib.al/cbCJdBt

Investing is both simple and hard: The basic premise behind successful investing is easily understood: “Invest for the long term, be diversified, watch your costs and let compounding work its magic.”

But following through can be challenging trib.al/IlhUfUl

Behavior is everything: The inability to manage emotions and behavior is the financial undoing of many.

Allowing emotional hot buttons to get pressed is how people go wrong in investing trib.al/IlhUfUl

Understand your role: The markets are populated by all kinds with different risk tolerances, time horizons and financial goals.

Do not assume what any of America’s 800 billionaires have to say about investing is especially relevant for your needs trib.al/IlhUfUl

Spend less than you earn.

Budgeting is simple: Income goes on this side of your household balance sheet, expenditures on that side and make sure the latter is lower than the former.

It’s that easy trib.al/IlhUfUl

The majority of the assets in your portfolio — hopefully a diversified, global mix of passive index funds — are the basic meat and potatoes of investing.

You can add seasonings and vegetables to that, a fun trading account perhaps, in moderation trib.al/IlhUfUl

Using borrowed money for nearly anything is the negative manifestation of the three prior rules.

Yes, get a mortgage to buy a house you can afford, but never use borrowed money to buy speculative assets that are subject to further capital calls trib.al/IlhUfUl

Understanding the limitations of your cognitive errors is just the start.

It’s also important to know what inadequacies you have financially, emotionally and behaviorally.

Operating outside of your own capabilities is a good way to run into trouble trib.al/IlhUfUl

You are responsible for your own financial well-being, not the Federal Reserve, the government or whichever huckster is yelling the loudest at the moment.

The sooner you take ownership of your financial circumstances, the better off you will be trib.al/IlhUfUl

Risk is best defined as the probability of your returns differing from your expected outcomes. The problem is that many investors want better-than-market returns while assuming minimal risk.

But returns are a function of the risks assumed trib.al/IlhUfUl

Educate yourself, develop an expertise and add to your professional skill stack.

Invest in your future by making sure you fully fund your retirement accounts every year.

Make those long-term investment needs before spending on short term wants trib.al/IlhUfUl