This is a myth. Far more companies have failed than succeeded. Far more countries' stock markets went to zero than markets which have survived. Just think of
Myth #2: 'Real Estate always goes up in the long term.'
While it is true that real estate has a tendency to appreciate in the long run, partly because of population growth, there is a problem with ownership and property rights. Real estate was a good investment for Londoners over the last 1,000 years, but not for
Problem rule #1: 'Buy Low and Sell High.'
The problem with this rule is that we never know exactly what is low and what is high. Frequently what is low will go even lower and what is high will continue to rise.
Problem rule #2: 'Buy a basket of high quality stocks and hold.'
Another highly dangerous rule! Today's leaders may not be tomorrow's leaders. Don't forget that Xerox, Polaroid, Memorex, Digital Equipment, Burroughs, Control Data were the leaders in 1973. Where are they today? Either out of business or their stocks are far lower than in 1973!
Problem rule #3: 'Buy when there is blood on the street.'
It is true that bad news often provides an interesting entry point, at least as a trading opportunity, into a market. However, a better long term strategy may be to buy on bad news which has been preceded by a long string of bad news. When the market no longer declines, there is a chance that the really worst has been fully discounted.
Rule #2: Don't trust anyone!
Everybody is out to sell you something. Corporate executives either lie knowingly or because they don't know the true state of their business and the entire investment community makes money on you buying or selling something.
Rule #3: The best investments are frequently the ones you did not make!
To make a really good investment, which will in time appreciate by 100 times or more, is like finding a needle in a haystack. Most 'hot tips' and 'must buys' or 'great opportunities' turn out to be disasters. Thus, only take very few investment decisions, which you have carefully analyzed and thought about in terms of risk and potential reward.
Rule #4: Invest where you have an edge!
If you live in a small town you may know the local real estate market, but little about Cisco, Yahoo and Oracle. Stick with your investments in assets about which you may have a knowledge edge.
Rule #5: Invest in Yourself!
Today's society is obsessed with money. But the best investments for you may be in your own education, in the quality of the time you spend with the ones you love, on your own job, and on books, which will open new ideas to you and let you see things from many different perspectives.
