The decade that opened with Y2K fear and dot-com greed, now ends in confusion. In between there was Nine Eleven, stock and real estate bubbles, crash, collapse, bailouts and more bubbles. Incredibly, the stock market yielded nothing over ten years, putting a stake through the heart of index funds. In the US, real estate also made nothing in many cities. In Canada we’re about to understand why.

When the decade began the Boomers were thinking of Freedom 55. Screw that. Next year they start turning 65, with profound consequences. Not a day goes by that some noted company goes bankrupt, and the people I know who lost jobs months ago are still without. No normal yet. Or  soon.

As the year and the decade fizzle Thursday night we launch into new time. But not a new age. Investors will still be led by greed and fear, and make as many mistakes as ever. This is why I ‘m a devout contrarian, and why my new book, Money Road is devoted to this cause.

Among its tenets:

• The focus of investing isn’t the present, but the future. Don’t be swayed by the hot and trendy. Most investors have no idea what they’re doing. The majority notice trends long after they’ve started, pile in late and fail to clue in as to when the party’s ending. Betting against the herd usually works.

• Diversification trumps buy-and-hold in the environment we’ll be in for the next decade. Most people think current conditions will last indefinitely instead of being a bridge to the next phase of the cycle.

• So, asset allocation’s critical. Divide what you have to invest among the three main asset classes, and don’t get blown off course by a hot stock tip or a market swoon. Recall how many people missed cashing in at the top of the tech boom in 1999-2000, or  stampeded out at the bottom of the crash in 2008-9. Contrarians buy low and sell high. The rest buy high and sell low.

• Never invest in anything without knowing how you`re going to pay tax on the proceeds – as income, capital gains or dividends. This can seriously alter how much you get to keep. Tax-smart investing is not even on the radar of most Canadian families.

• Understand the economic and market cycles. Today timing is far more critical than in the past as we enter a period of slow growth and range-bound markets. Moments of maximum despair are usually those of greatest upward opportunity, while the times when society’s most confident and bullish are the days to reap profits and sit on the sidelines in cash.

• Work back from your goal. If you need $500,000 at age 60, and you’re starting from scratch twenty years earlier, then GICs and bonds won’t get you there. Find an asset allocation that does. Do not obsess about what little you have, but rather how much you will achieve. Remember that non-systemic risk is eliminated with 32 stocks.

• Make the maximum use of tax avoidance, tax deferral and tax minimization. Tax-deductible investment loans, a tax-deductible mortgage, RRSPs and RRIFs, strategies using the tax-free savings account (TFSA), meltdowns and registered education savings plans. Canada gives its citizens incredible chances to avoid being taxed.

• When it comes to both equities and real estate, abide by the Rule of 100. A hundred minus your age will give you the percentage of your total net worth a house should represent. Likewise, 100 minus your age should be the minimum equity share of your investible assets (net worth less your home). Houses can turn illiquid in a hurry. Just ask people in the great suburbs of Phoenix or Miami. If you’re a woman, make it 110.

• Learn and do as much as you can, but never risk your security by trying to do everything. Most investors don’t even come in contact with new bond offerings, superior ETF products or dividend issues. Today fee-based advisors will design a portfolio, build it, monitor it and worry about your returns and taxes for 1% of its value. Email me (garth@garth.ca) if you need help.

• When most investors think prices can only rise (the ’buy now or buy never’ mentality), there’s probably not enough left to keep prices rising. If 80% are bulls, the market’s overbought and will fall. Just remember how everyone said ‘it’s different this time’ when profitless dot-com companies were flying high. Of course it wasn’t different at all – bulls make money, bears make money, pigs get slaughtered. Conversely, when a minority of people believe the market will rise, prices are oversold and won’t stay cheap for long.

• Learn about indicators like the public short ratio. It measures the relationship between the number of short sales (that’s when a stock is borrowed from a broker and sold, in the hope of buying it back later at a cheaper price) made by average investors, compared to the shorts made by professional traders. The assumption is the little guy’s a lousy trader, so trading in reverse is a profitable move.

• Watch, study, observe. Do the opposite. And reap.

Garth's latest podcast is here.