FRANKFURT / LONDON (IT BOLTWISE) – Stock market wisdom is omnipresent, but how much truth is there really behind it? From ‘Sell in May and go away’ to ‘The market is always right’, these sayings are often quoted. But which strategies actually make sense and which ones are misleading? A closer look at the most famous stock market wisdom shows that not everything that glitters is gold.
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The world of the stock market is full of proverbs and wisdom that are intended to provide guidance to investors. But how much truth is there really behind these oft-quoted sentences? One of the most famous stock market wisdom is ‘Sell in May and go away’. This strategy is based on the assumption that stock prices tend to decline in the summer. But Eugene Fama’s market efficiency hypothesis suggests that such patterns cannot be exploited long-term because they would be quickly recognized and neutralized by many investors.
Another well-known saying is ‘The trend is your friend’. This wisdom suggests that it makes sense to follow the prevailing market trend. But whether a trend is actually an investor’s friend depends heavily on individual market positioning. While long investors benefit from rising prices, short sellers bet on falling prices. It is therefore important to always keep an eye on your own strategy.
The warning ‘Never reach into a falling knife’ is also widespread. She advises against investing in stocks that are in a strong downtrend. But experienced investors know that there are also opportunities if you time it right. It is important that the company has solid fundamentals in order to be successful in the long term.
Another saying that is often quoted is ‘Buy on bad news, sell on good news’. This strategy relies on countercyclical action, but can be risky. Bad news can also indicate fundamental problems that will weigh on the share price in the long term. Therefore, investors should always conduct thorough analysis before betting on such strategies.
In summary, although stock market wisdom can provide guidance, it should not be followed blindly. A well-founded analysis and a clear investment strategy are essential to operate successfully on the capital market. Ultimately, the market is always right and it is the investor’s job to make the right decisions.
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