Given the complexity of investment markets and investing along with the massive amount of information available to investors many people rely on logic based on ‘common sense’ or simple ‘rules of thumb’ in making investment decisions. However, while some such rules of thumb are reasonable, in many cases they are not and can result in investors missing opportunities or losing money. In this note we look at some of these and why they are unreliable. The trick to successful investing is to be aware that markets (and economies) are highly complex, that they don’t go in the same direction indefinitely, that markets are usually forward looking and that avoiding crowds is healthy. All of this is particularly pertinent right now given that share markets are trending higher and yet we are in recession and unemployment is on the rise virtually everywhere.

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