Some of these self-evident truths look fine on paper but are destined to fail in the execution, because they don’t take into account human frailty. Some are self-serving, and others are self-evidently nonsense to begin with.

When it comes to investing, there is no substitute for understanding what you are buying and selling, why you are doing it and how to best go about it. Being flexible rather sticking to an approach that is plainly not working also helps.

Money puts some popular market maxims to the test and busted a few myths in the process.

Time in the market, not market timing.

Everyone agrees it’s impossible to time the market. In order to take emotion and crystal ball gazing out of the investment process, some professionals urge investors to ignore daily market fluctuations and take a long-term view. This is because over time growth assets such as shares and property outperform other asset classes.

To back up their claim, these professionals will often trot out statistics showing that not being invested for just a few of the best days dramatically lowers returns.

Foe example, the US market produced an annualised return of 17.5 per cent in the 1980s, so an investment of $10,000 that stayed fully invested would grow to $50,162. But an investor who had missed the best trading days would end up with just $14,661.

Yet no one ever talks about how you could beat the market by missing the 40 worst trading days in the decade, even though it is also self-evidently true.

The problem with the “best and worst days” theory is that most investors own a handful of shares and managed funds which may perform better or much worse than the index. Only index funds track the movement of the overall market, so if your aim is to match the overall market return, you can’t go past an index fund.

But many personal investors aim to do better than the market, especially when it is in free fall.

Market educator, author and professional investor Colin Nicholson says “time in the market” is a self-serving theory most often used by fund managers who want investors to give them money and stick with their investment.

“Time in the market” may also be a convenient way for fund managers to gloss over mismanagement, as if to argue that risk doesn’t matter over the long term. But a poorly managed fund or a dog stock is just as likely to perform over the long term as the short term.

Nicholson argues that investors can do better than “buy and hold” without becoming traders or speculators. “If the market is going down, down , down, you will be better off out of the market,” he says

Every legendary investor Warrem Buffett, well-known for holding companies he likes for decades, is keenly aware of market timing. The difference is that he is prepared to wait patiently for the right price.

John Price, who emulates Buffett’s investment methods in his Conscious Investor trading program, says Buffett bought a stake in Anheuser-Busch last year after keeping an eye on it for 25 years. For Buffett, the right time is when a great stock is offered at a price that will produce the return he wants. Whether or not the stock is at a short-term high or low is irrelevant.

Few people possess Buffett’s skill especially when they are just starting out, but he is proof that understanding what you are investing in beats trying to second guess the market.

You’ll never go broke taking a profit

Followed to the letter this seemingly self-evident truth could easily lead investors astray and was myth that almost everyone Money spoke to was keen to bust.

Nick Renton says the “sell Half” dictum is commonly used by brokers to disguise the fact that they don’t what they’re talking about.

“If you sell half and the stock price subsequently falls, the broker says isn’t it good you sold some, and if the price continues to go up, he says isn’t it good yo only sold half.” Renton says.

John Price says the problem with taking profits is that people invariably put the proceeds back into a stock that underperforms the one they’ve just sold, echoing the research by Terrance ODean discussed above.

“Don’t sell [your winners] unless you know what you are going to do with the money and you’re confident the new stock will do better than the one you just got out of,” Price says

Nicholson agrees. “Taking profits too soon is a good way of never making money,” he says.

Even professional investors are happy if six out of ten investments are profitable. If you consistently take profits too early, you won’t generate the returns necessary to cover your losses.

“In the long term, if you take small profits you won’t do nearly so well as someone who buys into a good company and sticks with it,” Nicholson says.

Price believes setting an automatic stop/loss can create similar problems. It is common practice among share traders to set a price above and below their purchase price that will trigger an automatic sale. This is designed to crystallise profits and limit losses.

“[A stop loss] sounds seductive, but most good stocks go down for a period, and if you sell every time they go down 10 per cent, you will lose out,” Price says. His philosophy is to use value as a uide and to buy and sell as little as possible.

Overtrading, sometimes called churning, is a common investor mistake and only rewards stock brokers and advisors paid by commission, not to mention the Tax Office. Share sold within 12 months do not qualify for the 50 per cent capital gains tax discount.

Kerr Neilson argues that setting a fixed percentage of profits as a trigger to sell is a primitive way of adding discipline.

“You should have a clear idea what a stock is worth in the market. When the trend overshoots, then sell your position,” he says.

Renton also dislikes arbitrary targets. He argues that there is no point selling a stock when it goes up by a specific proportion if it still represents good buying. It may go on to prices two or three time as high.

John Price is CEO of Conscious Investing. Email: johnprice@conscious-investor.com