Stock Market Rules

Most of the complicated aspects of our lives could be improved by gathering information before taking action. Asking why and digging deeper for information is an inconvenience because it calls for analysis, thought, and the formation of a conclusion. These activities take time and energy, and they can often lead to confusion and frustration. To avoid these problems, we mainly depend on the wisdom of others or adopt a shoot-fromthe- hip approach to investing.

Depending entirely on the wisdom of others or shooting from the hip can lead to many misunderstandings. Misunderstandings cause bad timing and poor strategies. Investment advice can be helpful, but it can be even more useful as a point of reference, a second opinion, rather than being accepted as the only approach.

In the stock market, the odds of doing well are improved for the investor who becomes familiar with the current action of the market and the particular stock of interest. Becoming familiar with the action can be accomplished by asking why: Why is the market making this move? Why is the stock an attractive purchase now?