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Buy the rumour and sell the fact

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Simon Brown, founder and director of investment education website Just One Lap. (Photo: JSE/Twitter)
Simon Brown, founder and director of investment education website Just One Lap. (Photo: JSE/Twitter)

I wrote an article late last year about buying ahead of the news to catch the move when it happens; essentially buying the rumour and then selling the fact. This is a phrase often repeated on the market, and I want to dig more into the concept and also when to actually sell.

I first encountered this concept in the late 1990s with a stock called Mouldmed. There was lots of talk that they had an exciting new product coming to market and the stock was flying higher.

I did not buy, but rather waited for the announcement and I only bought when the news was officially announced. Then I watched as the share gave back about 50% of its value after the news. I was distraught, but I did learn the lesson – be early, buy the rumour (or expectation) and sell the fact (the actual breaking news).

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