Fifteen favourite fallacies

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2. "You've got to speculate to accumulate"

No, you haven't. Like many proverbs, this is obviously false when you pause to think about it. Most people have accumulated the bulk of their wealth through housebuying. Did they have to speculate to do it? Did you? Of course not. Instead, whenever you moved home, you had to go through a careful, step-by-step process of

• sifting through information about houses and neighbourhoods
• visiting properties
• raising money
• selecting professionals to help you (lawyers, removal firms etc)
• negotiating a deal

It's just the same with share buying. Or rather, it should be. You would never have dreamed of slapping down a deposit on a house you had never even looked round. Yet this is what speculators do all the time with shares. They pile in and out of glamorous-sounding companies, often without knowing the first thing about their financial state or even their line of business.

And not only do they hope to make money - they actually expect to get rich quick. Yet the overwhelming probability is that they will do the opposite, because they do not realise the dangers they are running. Imagine what would have happened to your housing equity if you had traded frenziedly in and out of properties several times a year. You would either have handed over most of your gains to solicitors and estate agents, or worse, you would have overpaid and lost big money on your sales, instead of watching your equity accumulate as the value of your home rose over the years.

In just the same way, when buying shares you need to

1. Calculate as carefully as possible the real value of what you are buying, in order to minimise the risk of overpaying
2. Keep your transaction costs low, so that brokers, marketmakers and data providers do not make more from your investments than you do
3. Wait for your decisions to pay off, or for it to become clear which are the bad decisions that need to be changed.

In short, you've got to calculate to accumulate. Then be patient. Aim to get rich slow.

1. "Investing is just gambling anyway, so why not take a few chances?" 2. "You've got to speculate to accumulate" 3. "Growth always wins in the end/Value always wins in the end" 4. "Blue chips are best/Smaller companies are best" 5. "Penny shares are the best value for money" 6. "It's such a great company, I can't go wrong" 7. "But just look at the dividends" 8. "I've got to be in technology/biotechnology/telecoms etc" 9. "I missed that one, I'll catch the next one" 10. "Paper losses aren't real" 11. "I'll never go broke taking a profit" 12. "It can't possibly go any lower" 13. "It can't possibly go any higher" 14. I can't sell because of the tax bill 15. "This time it's different" 16. Conclusion

• One Up On Wall Street