I think it’s helpful to invest in a company you know, primarily because when you are interested in your investments you’ll learn more about them.
I also believe that you’ll learn more about how the market works, because you’ll be more curious.
Have you ever seen a company release good news (or announce good earnings) and then go down?
It could be because “market expectations” (rather than reality) were let down. A great example of this is when a company announces good earnings, but gives a forecast lower than analysts were expecting. Analysts would then lower their price projections, which then in turn (possibly) put downward pressure on the stock price. (By the way, simple uncertainty would probably also put downward pressure.)
The reality is that markets are not governed by tight rules. Prices are a function of demand and the way the market works — for example, when mutual funds need to rebalance they may sell a position, which if large enough will put downward price pressure on the company’s stock price, even if nothing else about the company has changed.
Anyways, I’m writing this post mostly to introduce another post I saw, liked, and want to share with you. Please read Today in Market History, Buy the Rumor, Sell the News on The Irrelevant Investor.
Let me know what you think