The 14 Truths You Must Know When You Invest

The media do what's in their interest. The winning strategy for them is the losing strategy for you. I watch CNBC with the mute button unless a Jeremy Siegel or some other professor with something interesting to say comes on.

For investors, there are three conflicts of interest. First, Wall Street: They make more money from 1.5% than by giving you index fund. Second, the media. Third, many advisers think they have to justify themselves to get a fee. "If I take you're money and put it in passive vehicles," they say, "then what do you need me for?"

Back to the media, remember: Don't confuse information with knowledge. Every time you hear something, ask yourself: Do I know this information before everyone else, and can I gain some advantage by knowing this?

Truth 5: People Confuse Great Companies With Great Investments

People never seem to understand this point, even though it's a simple one. So I'll give an example of something they understand: real estate. Let's say you can buy two properties in Manhattan; both cost $10 million and pay rent of $1 million a year. One is on 52nd and Park, the other is in the worst section of Bedford-Stuyvesant.

Which is less risky? Park and 52nd. In the real world, you would get to pay the same amount for something that offers considerably less risk -- and you wouldn't get this opportunity in the stock market, either.

But it must be so that the safer investment has a lower return. Let's use Wal-MartWMT and J.C. PenneyJCP as an example. If you could buy either company for $20 billion, which would you buy? Wal-Mart! They have a better management, greater financial strength and history of consistent growth. If they were both priced at $20 billion, every single J.C. Penney investor would sell his stock and buy Wal-Mart.