harry had 17 rules , these are my favorite .he wrote these almost 50 years ago
Rule 3: Recognize the difference between investing and speculating.
When you invest, you accept the return the markets are paying investors in general. When you speculate, you attempt to beat that return — to do better than other investors are doing — through astute timing, forecasting, or stock selection, and with the implied belief that you’re smarter than most other investors.
You’re speculating when:
You select individual stocks, mutual funds, or stock market sectors you believe will do better than the market as a whole.
You move your capital in and out of markets according to how well you think they’ll perform in the near future.
You base your investments on current prospects for the nation’s economy.
You use fundamental analysis, technical analysis, cyclical analysis, or any other form of analysis or system to tell you when to buy and sell.
There’s nothing wrong with speculating — provided you do it with money you can afford to lose.
Rule 4: No one can predict the future.
Beware of fortune tellers.
Events in the investment markets result from the decisions of millions of different people. Investor advisors have no more ability to predict the future actions of human beings than psychics and fortune-tellers do. And so events never unfold as we were so sure they would.
Yes, there have been forecasts that came true. But the only reason we notice them is because it’s so exceptional for even one to come true. We forget about all the failed predictions because they’re so commonplace.
No one can reliably tell you what stocks will do next year, whether we’ll have more inflation, or how the economy will perform.
As with the rest of your life, safety doesn’t come from trying to peer into the future to eliminate uncertainty. Safety comes from devising realistic ways to deal with uncertainty.
We live in an uncertain world – and that no one can eliminate the uncertainty for you.
Look for ways to assure that the uncertain future won’t hurt you – no matter what it turns out to be.
Rule 5: No one can move you in and out of investments consistently with precise and profitable timing.
Don’t expect anyone to make you rich. You’ll hear about many Wall Street wizards, but the investment advisor with the perfect record up to now most likely will lose his touch the moment you start acting on his advice.
Investment advisors can be very valuable. A good advisor can help you understand how to do the things you know you need to do. He can help call your attention to risks you may have overlooked. And he can make you aware of new alternatives.
The Helper (accountant, etc) is worth listening to. He or she can acquaint you with investment alternatives you weren’t aware of, and that might be a good fit for you. He can teach you the mechanics and procedures for getting things done in the investment world. He can raise the questions you need to answer in order to devise a portfolio that suits your needs. He can help you reduce the tax bill on your investment profits.
You don’t act on the advice of someone you never heard of. And you hear of him only after – and because – he has made several profitable recommendations in a row.
The investment expert with the perfect record up to now will lose his touch as soon as you start acting on his advice.
But no one can guarantee to have you always in the right place at the right time. And worse, attempts to do so can sometimes be fatal to your portfolio.
Rule 6: No trading system will work as well in the future as it did in the past.
You’ll come across many trading systems or indicators that seem always to have signaled correctly where your money should have been, but somehow the systems never come through when your money is on the line.
Trading systems generally arise from one of two sources.
The first source is a commonsense observation about human behavior – which someone then tries to transform into a quantifiable, mechanical system.
For example, Contrary Opinion is a theory that says, among other things, that an investment is likely to be near its peak when everyone seems to know how good its prospects are.
The idea makes some sense. If everyone already knows something is a good investment, most people who are likely to buy it probably already have done so – leaving very few investors to buy it and push its price still higher.
In such a case, you should be skeptical about its prospects as a speculation.
But that doesn’t mean we know precisely when or at what price the investment will peak. You know only that there doesn’t seem to be room for the price to go much higher.
But people who devise trading systems aren’t satisfied with anything so indefinite. They devise indicators to measure the precise degree of bullishness and bearishness surrounding a specific investment – and then construct formulas that provide specific signals for buying and selling.
This is similar to taking an obvious truth – such as that attendance at sporting events is generally smaller on rainy days than on sunny days – and constructing a formula that supposedly translates the number of inches of rainfall into an exact forecast of the attendance.
The second source is probably finding something that has worked in the past and assuming it will work in the future. Trading systems are based on the unstated assumption that the world doesn’t change. But the world is in constant change – as desires change, demand changes, and supplies change.
https://thetaoofwealth.wordpress.com...ancial-safety/
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
