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Second rule of investing

Yesterday we started to review the main rules that any investor need to follow in order to make money on the markets. The first rule that we stated was that you should never invest money that you cannot afford to lose.

The second rule that we are going to review today is that you absolutely need to invest on the long term.

Some investors (they might only have some attributes of the generally accepted definition of investor) believe that it is possible to make a lot of money in a short period in the stock markets. Most of the time these investors are aware that most people actually lose money when they try trading at high frequency. However, most of them also believe that they may be smarter and that they will manage to succeed where most (if not all) do fail. You certainly have seen that there are a multitude of classes all over the world that are supposed to teach you to make money in the markets by trading actively FX or stocks. Of course, 99% of these classes are pure fraud, and the remaining 1% will certainly not make you rich either, or at least not by trading that way. No one can foresee how stocks are going to react in the short term. On top of this, high frequency trading can only be profitable for the big financial institutions that use advanced algorithms and powerful computers. The only way to make money on the stock markets for an individual investor is by following this rule: always invest in the long term!

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