Don’t join the herd. The public buys the most at the top and the least at the bottom – Bob Farrell
- 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.
Conclusion –
These 10 rules are like “Investment Mantras” which can act as a guideline and help investors in decision making in various market situations. These rules can help investors look beyond latest headlines, can prevent them from selling at bottom and buying near the top as investors are most pessimistic at market bottoms and confident at the top. These rules can help an investor in taking rational decisions and not get carried away with emotions.
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