What constitutes a timeless investing axiom? The dictionary describes something that's "timeless" as not being affected by the passage of time or changes in fashion. " Modern investment practices can be traced back to Greece around 2000 BC. Over the centuries, banking institutions grew exponentially by providing loans to merchants throughout the known world. The merchants gave farmers and traders loans for seed to grow their harvests. Soon, craftsmen plied their efforts in a cultivated agrarian society. Trade was initiated by shipping goods between cities. New trade routes were continuously opening up new trade routes to the rest of the known world.
Modern banking as an institution established itself in earnest in America during the late 1800's. Wall Street Prep described the banking industry's rocky start. However, the dawn of the 20th century marked the "Golden Age " of Wall Street. The Titans of Industry-- men like JP Morgan, and Mellon, ruled the roost on Wall Street and experienced the calamitous Panic in 1907, which gave rise to the formation of the Federal Reserve in 1913. This nascent period is well documented for its excess and resulted in the Knickerbocker Crisis. The meltdown threatened the very existence of the fragile exchange. A total crash was averted only through the direct actions taken by financier J. P. Morgan] who pledged large sums of his own money, and convinced other New York bankers to do the same, to shore up the banking system.
7 Timeless Tips to Sheppard You Through the Littered Landscape
In intergalactic terms, the financial system is still in its infancy. While any financial instrument or artifact that truly retains value is, essentially, a candidate for the Timeless category of financial axioms. When stringently adhered to, these invaluable tips will always prevent you from staring into the financial abyss, wearing that deer-in-the-headlights look. A recent article published in Investopedia is based on the work of Bob Farrell, head of research at Merrill Lynch, and one of the leading market analysts on Wall Street. His insights on technical analysis and general market tendencies were canonized as "10 Market Rules to Remember." Here are the top 7 from Farrell's list of 10:
1. Markets Return to the Mean Over Time
Like clockwork, every 4 to 6 years, the markets will encounter a "Correction". These encounters are usually short-lived and healthy for the economy. This cooling-off period serves to bring the markets to their pre-correction senses.
2.Excesses Lead to an Opposite Excess
"Remember, a correction is represented by a move of more than 10% of an asset's peak price, so an overcorrection can mean bigger movements," Fuller explains, adding "Tuned-in investors will be wary of this and will possess the patience and know-how to take measured action to safeguard their capital…".
3. Excesses Are Never Permanent
Just as with local weather, nothing on the street ever stays the same for very long. Stick with the mean and you can't go wrong
4. Market Corrections Don't Go Sideways
" Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways," Fuller explained.
5. The Public Buys Mostly at the Top and Least at the Bottom
Human behavior is fickle as it is nonsensical. In spite of constant repetition of the old mantra "Buy low, sell high., the first casualty of panic is common sense.
6. Fear and Greed: Stronger Than Long-Term Resolve
Fear and Greed are two emotions that have no place at the table when evaluating your financial options.
7. Markets: Strong When Broad, Weak When Narrow
The average investor is part of an impetuous lot. They are easily influenced by disinformation that runs rampant on just about every conceivable IoT device on the planet. Unlike the technical analysts, the investor responds to emotional, rather than empirical evidence. Yet, it would be difficult to find anyone who has not heard the old axiom "Buy low, sell high", thousands of times. However, many investors, both experienced and inexperienced, prove once again that human nature is a whole different paradigm. To access the complete list of Fuller's axioms, click here.