The Rules of Wealth, 3rd Edition

RULE 55

Understand how the stock market really works

It’s simple. People buy, sell and trade investments – called stocks – that they have made in companies. So, how does it all work? And, more importantly, what works?

The easy answer to the last question is ‘Buy low; sell high,’ but don’t you just know that there’s more to it than that. The question of deciding what to buy, how much to pay for it and when to buy (and then sell) it has been the subject of entire libraries of books, most of them bigger than this one, and so I’ll limit my contribution to a few choice rules, and the first of these is to understand the real forces at play: value and speculation.

Personally, I think economists were put on this earth to make astrologers look good, ...