Stock Market Sayings should be taken with a grain of salt. They are entertaining and have some truth to them. Today’s complex markets however should not be reduced to one-liners.

Buy the Dip

“Buy the Dip” is an accumulation strategy that works well in a bull market.

Buy the rumor, sell the news

The stock market lives off rumors and speculation. Once the news is confirmed, the excitement wears off and the opposite price action can be observed. News traders often use “fading”, e.g. shorting a company with great earnings after the initial enthusiasm (and price increase) have waned.

Buy low, sell high

Simple to say, but not easy to implement in practice. Indicators such as moving averages, Bollinger bands, and overbought and oversold signals help traders attempting to buy low and sell high. Dollar-cost averaging into a low-cost diversified portfolio is more likely to be the winning and less time-consuming strategy. 

Cash is King

It is difficult to take advantage of pullbacks or new opportunities if you are fully invested.

Dead-cat bounce

Rally in a bearish trend which is merely a short-term reaction and not an indication that the underlying trend is reversing.

Don’t fight the Fed

Investing choices should consider overall Federal Reserve policy. Low or decreasing interest rates facilitate higher stock valuations and high or increasing interest rates facilitate lower stock valuation.

Markets climb a wall of worry

Stock markets tend to be resilient. While there are plenty of stumbling blocks, they generally have been ascending over time.

Never catch a falling knife

Prices may look attractive after a pullback, but there could be reasons for an even further decline.

Nobody ever went broke taking profits

Don’t get too greedy. Markets go up as well as down. If your position created a good profit, consider selling before the price may drop significantly. Contrary concept to HODL which means holding on to an asset despite declines in hopes of outsize long-term returns.

Sell in May and go away

Historically, some wealthy investors would sell their positions in May to spend the summers in their countryside residences. Upon their return to the city in the fall, they would have time to attend to stock markets again. While there is some proof for this pattern to have worked in the past, little predictive power should be attributed to this saying.

The Trend is Your Friend

Embraced by the momentum crowd, this is generally true and useful – until it is not.

This time is different
A technique investors and commentators use to try to justify high prices. Stick to traditional metrics such as price to earnings. Most likely, this time is not different. “The four most dangerous words in investing are “it’s different this time.”” (Sir John Templeton).