There aren't too many laws when it comes to investing, but some things are always certain, even when it comes to investing. If you are thinking about investing in stocks any time in the future, or are currently invested in the stock market, make sure that you understand these laws. They are the truth of the market as we know it today!
Here are the four laws for investing in stocks. Make sure that you follow them because they are always true:
1. You Don't Know More Than Anyone Else
Sorry, but unless you're Gordon Gekko, you don't know more than anyone else investing in the stock market today. All of the information is out there. For most investments, it is more of a question as to whether people are paying attention or not. It's not a question of the information being available. The way to speed around this law is to do your homework. Just realize that you are probably reading the same public information as analysts on Wall Street.
2. There is No Free Lunch
The stock market is a zero sum game. Every time you are able to buy a stock, it is because someone else is selling it. Now, you have to ask yourself, why would they be selling? What do they know that I don't? There is no free lunch in the stock market, and you need to make sure that you realize that from the start.
3. Nobody is Vested Except for Yourself
Investing means that you are putting your own money on the table. That makes you the only one invested in your positions. Even if you use a stock broker, or relied on some other source for advice, unless they are matching your position dollar for dollar, you are the one who needs to make the call. Make sure that you're fully informed and know what you're getting into, because it's your money.
4. Nothing is Ever Certain
In the stock market, nothing is ever certain. The market will go up. The market will crash again. It is inevitable – it is more a question of when rather than if.
And who knows by how much. It really could lose 90% of its value. There is no reason why it couldn't. Realize this when you invest.
But remember, it's very unlikely that you'll ever lose all your money when you invest.