10 Things to Remember in a Bear (or Bull) Market

This has been one of those years when investors need a double helping of comfort food.

During the really good, and the really bad times, I have always found it helpful to read and re-read the observations of former Merrill Lynch market strategist, Bob Farrell, who observed equity markets for decades. I’ve always liked this list as it (should) remind us in the good times not to confuse good fortune with intellect, and, in times like now, equally reminds us that the light at the end of the tunnel isn’t always a train.

Bob Farrell’s 10 Rules for Investing.

1. Markets tend to return to the mean over time

2. Excesses in one direction will lead to an opposite excess in the other direction

3. There are no new eras -- excesses are never permanent

4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways

5. The public buys the most at the top and the least at the bottom

6. Fear and greed are stronger than long-term resolve

7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names

8. Bear markets have three stages -- sharp down, reflexive rebound and a drawn-out fundamental downtrend

9. When all the experts and forecasts agree -- something else is going to happen

10. Bull markets are more fun than bear markets