[Summary]
Buying on rumors and selling on facts is a market psychology in which prices rise due to expectations and sell after announcements.
Merely remembering the meaning of buying on rumors and selling on facts is not enough to make actual buying and selling decisions. You need to look at the context in which the words are used.
In actual investment, we first start by looking at the expected value before and after financial results, approvals, and announcement events. However, we cannot overlook the fact that it is easy to overlook the reason for the decline even though it is good news.
In this article, we will organize the process of buying based on rumors and selling based on facts, not as "knowledge" but as steps to confirm before buying or selling. Don't rush to conclusions, read according to your financial amount and time horizon.
First, distinguish between buying based on rumors and selling based on facts.
When considering buying on rumors and selling on facts, first determine what you want to judge. The information you need will change depending on whether you want to know the meaning, confirm before buying or selling, or review your current holdings.
Especially for beginners in investing, the easier the words are, the more they tend to take them as a conclusion. Buying on rumors and selling on facts, but that alone is not enough to make a decision. If you want to check it, it is more realistic to look at it in conjunction with fund management, holding period, and opposing materials.
Putting the meaning of buying on rumors and selling on facts into practice
If you want to see the meaning of buying on rumors and selling on facts, first of all, make a narrow premise. It is important not to mix up whether you are talking about the market as a whole, individual stocks, NISA or long-term funds.
Checking the following points will make things a lot easier.
| Axis to check | Buying on Rumors and Selling on Facts |
|---|---|
| purpose | What do you use to judge? |
| Time axis | Which is closer to short-term trading, long-term holding, or NISA? |
| basis | Which one is more important: price, business performance, interest rates, exchange rates, or psychology? |
| risk | When things go the other way, where should you look again? |
| action | Will it lead to buying, selling, or doing nothing? |
Points that can easily cause trouble in making decisions
Buying on rumors and selling on facts can cause trouble not only when you lack knowledge. In fact, there are situations where we interpret something conveniently because we know a little bit about it.
- Do not use the definition of buying on rumors and selling on facts as a buy/sell signal.
- Separate the meaning, situations in which it is used, and situations in which it is not used.
- Check only one difference between similar words
- If you cannot explain it, reduce your position.
The important thing here is not to settle on a single correct answer by simply buying the rumors and selling the facts. In investment, the meaning of the same material changes depending on the market, holding period, and amount of funds. When in doubt, prioritize confirmation over conclusion.
Checklist before buying and selling
Before you decide whether to buy on rumors or sell on facts, check at least these five things.
- Can you explain in one sentence the purpose of watching Buy on Rumors and Sell on Facts?
- Have you confirmed one or more countermeasures or failure conditions?
- Are you investing your living funds or money that will be used soon?
- Have you decided in advance the criteria for cutting losses, taking profits, and continuing to hold stocks?
- Are you making judgments based only on social media or short headlines?
Checklists are simple, but they prevent you from adding reasons after making a decision. The purpose of buying on rumors and selling on facts is not to make you act faster, but to reduce unnecessary errors in judgment.
Summary
Buying on rumors and selling on facts is a material for organizing your investment decisions. Even if you read it as a meaning, your judgment will be inaccurate if you treat it as a standalone buy/sell signal.
The points to keep in mind are as follows.
- Buy on rumors and sell on facts Decide on your purpose first.
- Do not mix time axis and amount of funds
- Check not only good materials but also negative materials
- When using NISA and long-term funds, consider how to handle losses
- When in doubt, reduce your position or postpone it.
The more knowledge you have, the safer it seems, but in the market it can become dangerous if you use it incorrectly. Buying on rumors and selling on facts should not be used as words to rush into judgment, but should be treated as a tool to pause before buying or selling.