Buy the Rumor , Sell the Fact
Does this heading sound familiar to you ? You must have heard it many times … ( I quoted this in my previous post too )
Please note that the statement is to sell the fact , not buy the fact. Implicit in this statement is the assumption that the rumor is bullish. Rumors , however , could be bearish too.
Bullish rumors are what we base our buying on. Once the bullish fact is known , then it is too late to buy because the bullish news would have been factored into the stock price. Instead it should be sold. The concept , then , is to buy in anticipation of bullish news and sell when the news is out. I used to monitor pre-earnings in some of my favorite stock picks. It has to be a fast game …
If the rumor you heard is bearish , leading to actual bearish news , then the statement , buy the rumor and sell the fact , does not hold. In fact , there …
