WSJ: Ten Stock Market Myths

Excellent article from the WSJ yesterday on 10 ridiculous things people are told and reiterate about stock market investing:

1 “This is a good time to invest in the stock market.”
Really? Ask your broker when he warned clients that it was a bad time to invest. October 2007? February 2000? A broken watch tells the right time twice a day, but that's no reason to wear one. Or as someone once said, asking a broker if this is a good time to invest in the stock market is like asking a barber if you need a haircut. “Certainly, sir — step this way!”
2 “Stocks on average make you about 10% a year.”
Stop right there. This is based on some past history — stretching back to the 1800s — and it's full of holes.
About three of those percentage points were only from inflation. The other 7% may not be reliable either. The data from the 19th century are suspect; the global picture from the 20th century is complex. Experts suggest 5% may be more typical. And stocks only produce average returns if you buy them at average valuations. If you buy them when they're expensive, you do a lot worse.
3 “Our economists are forecasting…”

Read the whole article here… Thanks Dazzo…

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One Response to WSJ: Ten Stock Market Myths

  1. Anonymous says:

    Prof Paul Samuelson wrote on the front cover of Stocks for the Long Run:
    “Jeremy Siegel makes a persuasive case for a long-run, buy-and-hold investment strategy. Read it. Profit from it. And when short-run storms rock your ship, sleep well from a rational conviction that you have done the prudent thing. And if you are a practitioner of economic science like me, ponder as to when this new philosophy of prudence will self-destruct after Siegel's readers come someday to be universally imitated.”

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