This man wrote 10 lines studied by even the smartest investors. Yet, his 10 rules are more useful than 10,000 hours of CNBC.
Here’s Bob Farrell’s “common sense” guide to uncertain markets:
Markets return to the mean Extreme prices never last. For eg: The S&P 500 fell 34% in March 2020, then fully recovered by August.
Excess in one direction leads to the opposite Bubbles create busts. For eg: The dot-com bubble drove tech sky high… then crashed the Nasdaq by ~78%.
There are no new eras “This time is different” is costly. For eg: Pre-profit stocks were unstoppable in 2021. In 2022, they weren’t.
Fast moves don’t end gently Parabolic rises collapse hard. For eg: Bitcoin rose 7x in a year, then dropped 75%.
The public buys tops, sells bottoms Crowds chase comfort, not value. For eg: Retail piled in near highs in 2021, then fled in 2022.
Fear and greed beat resolve Plans are easy. Sticking to them isn’t. For eg: Many sold at the bottom in March 2020 and missed the recovery.
Broad markets = strength When only a handful of stocks lead, it’s a warning. For eg: In 2023, 7 tech giants drove most of the S&P 500.
Bear markets have 3 stages Sharp fall → reflex rebound → long, grinding downtrend. For eg: The 2008 crash dragged on for months, not weeks.
When everyone agrees… expect the opposite If all are bullish, who’s left to buy? For eg: In Jan 2022, most analysts predicted a strong year. The market sank instead.
Bull markets are fun, bears are painful Everyone looks smart when prices rise. But real fortunes are made in bear markets… if you can survive them.
Farrell’s rules aren’t strategies. They’re reminders: • Markets swing • Emotions lie • History repeats
Ignore these truths, and the market will teach them to you — the hard way.