10 rules for smart investing from one of America's greatest stock speculators

Make money

Bernard Baruch is one of the most successful stock operators in American history.

Starting from scratch in the late 1800s, he built a fortune by navigating the frequent booms and busts that pervaded the stock market more than a century ago.

While it's true that Baruch was a speculator -- not an investor -- and has long since passed away, neither of these facts erode the value of his insights for investors today.

In the first volume of his autobiography, Baruch: My Own Story, the then 87-year-old financier dissects the madness of crowds, delves into what is now called behavioral finance, excoriates readers to make investment decisions for themselves as opposed to relying on the opinion of others, and talks about the difficulty of weeding through an onslaught of financial information in an effort to distinguish the signal from the noise.

Related: Warren Buffett Tells You How to Turn $40 Into $10 Million

Suffice it to say that Baruch was decades ahead of his time when it came to understanding the forces that only recently began to attract serious attention from financial scholars and market commentators.

Nowhere is this more apparent than in the 10 rules of investing that he shares toward the end of the book, which, in Baruch's own words, "mainly reflect two lessons that experience has taught me -- that getting the facts of a situation before acting is of crucial importance, and that getting these facts is a continuous job which requires eternal vigilance":

  1. Don't speculate unless you can make it a full-time job.
  2. Beware of barbers, beauticians, waiters -- of anyone -- bringing gifts of "inside" information or "tips."
  3. Before you buy a security, find out everything you can about the company, its management and competitors, its earnings, and possibilities for growth.
  4. Don't try to buy at the bottom and sell at the top. This can't be done -- except by liars.
  5. Learn how to take your losses quickly and cleanly. Don't expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.
  6. Don't buy too many different securities. Better to have only a few investments that can be watched.
  7. Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.
  8. Study your tax position to know when you can sell to greatest advantage.
  9. Always keep a good part of your capital in a cash reserve. Never invest all your funds.
  10. Don't try to be a jack of all investments. Stick to the field you know best.

To be fair, some of these are outdated and/or impractical insofar as the modern investor is concerned. The advice to avoid speculation unless it's a full-time job, for instance, simply isn't feasible in this day and age of self-funded retirement; whether the average American likes it or not, saving and investing simply isn't optional.

Related: Social Security: 5 Facts You Must Know

But far from detracting from Baruch's other points, this makes them even more valuable. Far too many investors buy stocks without knowing a great deal about the underlying companies. Far too many continue to believe that timing the market is still possible. And far too many miss opportunities for want of a cash reserve.

Indeed, despite the fact that Baruch shared this list almost 60 years ago, its value and relevance have handily stood the test of time.

John Maxfield has written for The Motley Fool since 2011. He has a bachelor's degree in economics from Lewis and Clark College and a juris doctorate from Southern Methodist University.

CNNMoney Sponsors