One of the biggest ironies in investing is that all the information and wisdom needed to invest successfully is readily available – but so few people ever actually use it.
Instead, we let our emotions take the lead, and color our judgment with panic. That’s why responsible wealth managers spend so much time calming clients down, and pointing them towards the wisdom they need to do well.
And that’s why I’d like to share a little of that wisdom with you today!
A June 2008 MarketWatch article published the following 10 investment rules developed by Bob Farrell over his many decades in the investment business:
- Markets tend to return to the mean over time.
- Excesses in one direction will lead to an opposite excess in the other direction.
- There are no new eras – excesses are never permanent.
- Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.
- The public buys the most at the top and the least at the bottom.
- Fear and greed are stronger than long-term resolve.
- Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.
- Bear markets have three stages: sharp down, reflexive rebound, and a drawn-out fundamental downtrend.
- When all the experts and forecasts agree, something else is going to happen.
- Bull markets are more fun than bear markets.
There’s never been a better moment to heed this advice than today.
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