Building wealth through investing doesn’t require a finance degree or the ability to predict market movements. Instead, success comes from following a few proven principles that have helped countless people achieve their financial goals. These four core principles form the foundation of sound investing, and they are simple enough for anyone to understand and implement.  Coincidentally, they are also the core principles of our Mosaicfi investing philosophy. 

1. Diversify: Don’t Put All Your Eggs in One Basket 

The most fundamental rule of investing is diversification – spreading your money across different types of investments rather than concentrating it all in one place. Think of it like planting a garden. If you only plant tomatoes and a disease wipes them out, you lose everything. But if you plant tomatoes, carrots, lettuce, and peppers, a problem with one crop won’t ruin your entire harvest. 

In investing terms, this means owning different types of stocks, bonds, and other assets. You might own shares in technology companies, healthcare firms, banks, and manufacturing businesses. You could also spread your investments across different countries and company sizes, from small startups to massive corporations. 

Why does this matter? Different industry sectors perform well at different times. When technology stocks are struggling, healthcare companies might be thriving. When U.S. markets are down, international markets might be up. By owning a mix of investments, you smooth out the bumps and reduce the chance that a single bad event will devastate your savings. 

The beauty of diversification is that you don’t need to pick the winners. Instead of trying to find the next big stock, there are mutual funds and ETFs that allow you to own a little piece of many companies and participate in the overall growth of the economy. This approach has consistently worked better than trying to outsmart the market by identifying individual winners. 

2. Keep Costs Low: Try to Keep Expense Ratios Under 0.5% 

An expense ratio is the annual fee charged by a mutual fund or exchange-traded fund (ETF) expressed as a percentage of your investment.  

The good news is that expense ratios have been declining for years, and low cost options are widely available. Many index funds and ETFs now charge less than 0.2% annually, with some charging as little as 0.03% or even 0%. These funds simply track a market index rather than paying managers to try to beat the market. Since passively managed funds require less active management and trading, they can offer much lower fees*.  

When evaluating investments, always check the expense ratio. A fund that charges 0.03% is usually preferable to one that charges 1.25%. Over time, the lower fees will add up to more money in your pocket.  

3. Stay Invested: Start Early, Stay Consistent 

Time is your greatest ally in investing, thanks to the power of compound growth. When your investments earn returns, those returns start earning returns. This snowball effect becomes more powerful the longer you stay invested. 

Starting early makes an enormous difference. Someone who invests $200 monthly starting at age 25 will likely have more money at retirement than someone who invests $400 monthly starting at age 35, assuming similar returns. The extra ten years of compound growth more than makes up for the lower monthly contributions. 

But starting early isn’t just about age – it’s also about getting started now, whatever your age. The best time to plant a tree was 20 years ago; the second-best time is today. Even if you can only invest a small amount initially, the habit of regular investing is more important than the amount. 

Consistency matters as much as starting early. Markets go up and down, sometimes dramatically. During scary periods, like the 2008 financial crisis or the early days of the COVID-19 pandemic, it’s natural to want to sell everything and hide your money under a mattress. But historically, investors who stayed the course through market downturns have been rewarded with strong long-term returns. 

4. Rebalance Periodically: Maintain Your Target Allocation 

Over time, different parts of your investment mix will grow at different rates. If you started with 60% stocks and 40% bonds, you might find yourself with 70% stocks and 30% bonds after a few years of strong stock market performance. This drift away from your target allocation can expose you to more risk than you intended.

Rebalancing means periodically selling some of your best-performing investments and buying more of your underperforming ones to get back to your target allocation. This might feel counterintuitive – why sell your winners to buy more of your losers? But rebalancing forces you to “sell high and buy low,” which is exactly what successful investors do. 

You don’t need to rebalance constantly. Checking once or twice a year is usually sufficient. Some investors rebalance on their birthday or at the start of each year. Others rebalance when their allocation drifts more than 5-10 percentage points from their target. 

Rebalancing also provides an opportunity to review your overall strategy. As you get older or your circumstances change, you might want to adjust your target allocation. Someone nearing retirement might want to shift from 80% stocks to 60% stocks to reduce risk as they approach the time when they’ll need to start withdrawing money. 

Putting It All Together 

These four principles work best when used together. Diversification protects you from putting too much faith in any single investment. Low costs ensure more of your money works for you instead of enriching fund companies. Staying invested harnesses the power of compound growth over time. Regular rebalancing keeps your risk level appropriate and forces good buying and selling discipline. 

The beauty of these principles is their simplicity. You don’t need to watch the market daily, analyze company financial statements, or make complex predictions about the economy. By following these straightforward guidelines, you are positioned to participate in the long-term growth of the global economy while avoiding many of the pitfalls that trip up other investors. 

Remember, investing is a marathon, not a sprint. These principles have helped investors build wealth for decades, and they will likely continue working for decades to come. Start with these fundamentals and you will have a solid foundation for achieving your financial goals. 

Sources:  *What is an expense ratio? Costs of investing explained | Vanguard.  

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Mosaic FI, LLC is a State of Illinois registered investment adviser. The opinions expressed herein are those of the firm and are subject to change without notice due to changes in the market or economic conditions and may not necessarily come to pass. Any opinions, projections, or forward-looking statements expressed herein are solely those of Jenifer Aronson and Leslie Meisner, may differ from the views or opinions expressed by other areas of the firm, and are only for general informational purposes August 6, 2025.

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