Bob Farrell's Ten Rules for Investing

Bob Farrell was a "legendary Merrill Lynch strategist", and the following are a set of maxims attributed to him to guide investment.

1. Markets tend to return to the mean over time.
2. Excesses in one direction will lead to an opposite excess in the other direction.
3. There are no new eras — excesses are never permanent.
4. Exponential rising and falling markets usually go further than you think.
5. The public buys the most at the top and the least at the bottom.
6. Fear and greed are stronger than long-term resolve.
7. Markets are strongest when they are broad and weakest when they narrow.
8. Bear markets have three stages.
9. When all the experts and forecasts agree, something else is going to happen.
10. Bull markets are more fun than bear markets.

There are articles by Barry Ritholtz and Jonathan Burton at MarketWatch that flesh out the points, if you want some further reading.

 

"Bull markets are more fun than bear markets."

I don't agree. Bull markets terrify me. I have had the most fun in my investing life since the Perth market tanked. The market might be bottoming out now and if it turns then I have a short timeframe before I chicken out and put my investing on hold until the next downturn.

 

Number 5 is interesting, just shows how emotions play major factor when investing

 

Warren Buffet:

A rising ride lifts all boats

It’s only when the tide goes out you can see who is swimming naked!