ZF Capital

IF SUCCESSFUL INVESTING was simply about doing your homework, then we’d all be rich. Truth be told, it’s not how skillfully you interpret information, but how you deal with the lack of it that really matters. To that end, I try to react to the market, not predict it’s every move. Regardless, if you’re buying or selling, I’m from the school that says trade first and ask questions later.

When it comes to making a trade, it’s human instinct to want certainty. I’m selling XYZ because it released poor earnings. I’m buying XYZ because its new product is in demand. The only problem: Markets anticipate news, rather than reflect it. By the time the “news” is out, the real move in the stock has likely already occurred.

So while we might crave certainty in our trades, we’re never going to get it. After all, that’s why it’s called speculation. Although it seems reckless, you’ve got to get comfortable with the idea of not always knowing why a particular stock is moving. If you’re always waiting for the headlines to confirm a market move, how can you ever expect to beat the herd? (more…)