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New Resource: Laws of Investing

28 May 2010 One Comment

Though my investing & trading experience is limited to less than 10 years, which is much less than many other veterans, I’ve decided to compile a basic list of “investing laws” that I’ve come to observe over the years.  I hope you find the list helpful.

1. The market is not a free market – As an individual investor, you don’t have the same advantages of Wall St firms.  There is definitely some level of manipulation in the market and even if it’s not blatant manipulation, with the majority of the daily volume being driven by computers, it’s hardly a normal market.  In order to succeed as an investor, you need to understand how the market really works.  Know that it doesn’t work in the manner that we think or naively hope it works.  Because of these manipulative or computer-driven forces on the market, the market is prone to excessive volatility (for an example, check out the “flash crash” of May 6, 2010).  Additionally, know that politicians want and need for the stock market to remain “high” since so many Americans’ savings and retirements depend on a rising stock market – a market crash is politically unacceptable – read into that how you wish.

2. Accurate economists are often not accurate market predictors – Some of my favorite economists who are typically right on the economy are frequently wrong on their market predictions.  Because of this, be careful making trades or investments based on even the best economists’ expectations of the stock market.  Over the short term, the market can be completely unpredictable.  The reality is that the stock market is often very different than the economy which brings us to the next law of investing…

You can read the rest of the 10 laws of investing by clicking here.  I have created this resource as a “Page” versus a “Post” so that it can be more statically available.  If you’re an RSS reader, click the link and check out the page.  Hope you enjoy.

One Comment »

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