Yesterday, I had provided a few famous quotes that you might have heard regarding the stock markets. Simple rules helping investors to make good trades (or trading in the hopes of making a profit 😉 ).
Don’t try to catch a falling knife
I think this quote speaks for itself. If you try to catch a falling knife (i.e. stock), you may be lucky and catch it on the sweet spot and not get hurt. However, 80% of the time you will cut yourself… maybe losing a finger in the process 😉 It is better to wait for signs of stability before buying a dropping stock. If you don’t wait, you might pay a higher price than necessary.
You’ll never go broke by taking a profit
As we have a tendency to fall in love with our holdings, it is hard to sell them when they are showing a profit. Driven by greed, most investors think they can get an additional 10% out of their stocks before selling them. Hence, they wait and hold their sell orders in the hope for even more profit. You are better off with a “profit rule” or asset allocation methods that will help you manage your portfolio objectively. Take profits when you are making money.
Don’t fight the Fed
Among several experts, this is one of the best suggestions I have heard. When the FED wants to slow down inflation, it will use everything in its power to make it happen. If you think that the FED will fail, you don’t have much hope of becoming a good trader. As the FED dropped the rate to the lowest in its history, you can be assured that the economy will arise from the ashes. Short selling the market right now may be quite a dangerous game… Have you ever heard of Russian roulette?
Economists are good to predict recessions. They announced 8 recessions out of 3.
Unfortunately, economists do their best with what they have. However, the USA is a big playground to cover. It has happened several times in the past where experts thought we were going into a recession and it never happened. I think that we still need to listen to what they say (they are definitely not that bad 😉 ), however, we might not sell all our stocks when they predict we are going into a recession. It would actually be too late anyways as the stock market as a leading indicator moves 6 to 9 months before the beginning of the recession and swings back to positive ahead of an economic recovery as well.
Financial Analysts are as reliable as meteorologists…
This is my quote ;-). I always say meteorologists are on target 50% of the time. The funny part about financial analysts is that you will usually find 50% of them agreeing on something and the other 50% thinking the other way. Predicting the future has always been a wish for many people. However, it is still a dream in many fields….
So that’s it for me, have you heard of any other great financial quotes?
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