Markets are notoriously hard to read and people see only what they themselves want to see.Bulls will find reasons why certain stocks will go higher, while at the same time, Bears will find many reasons for the same stocks to go lower.
The seldom-admitted truth is that most of the time, markets exist in some indeterminate state!
The main thing is that you cannot trust consensus and you cannot rely on the “Establishment.”
You can’t find refuge in the herd and you must resist the urge to join the crowd.
Your passion of the moment will most certainly create a disaster over the years!
On the other hand, if you do stick with the following five essential truths, you do stand a better than average chance to invest profitably!
1. Markets are unpredictable and ill-suited to forecasts.
2. Long-term fundamentals are key.
3. Investor emotion leads to volatility.
4. Valuation discipline should guide investment selection.
5. Perspective and patience are always well rewarded.
People choose to spend their money in many ways. The bulk of most people’s income goes for day-to-day living expenses:
Food, shelter, and clothing.
But even if you live a no-frills lifestyle, it is important to make some investments for the future. A relatively small sum set aside each year can make an important contribution to your long-term financial security.
The theory behind investing is elementary:
Money not needed now can be invested to produce more money later, which will come in handy when needed.
We all need money, not just for our day-to-day lives, but for bigger plans — buying a house, a car, a business, etc.
There is one major idea which comprises the philosophy of investing:
The Future Value of Money!
Future value is the sum to which an amount invested today will grow given some appreciation rate.
People invest on the hope or promise that they will receive more money later. Present value is the value in today’s terms of a certain amount of money in the future. This is based on some estimated rate-of-return over a long period of time.
When you invest …
Your money is working for you …
Rather than the other way around!