> Understand the market, understand the product and technology well, and you can do significantly better than any wall street analyst. Don't rush into it, but do your research. Look at the numbers and the growth potential.
This is very dangerous advice because it just ain't true. Under efficient markets, you can do equally well as "any wall street analyst"
1. Markets aren't efficient. They're full of emotion and greed. They can be irrational. Just look at Brexit - even stocks that had zero exposure to the UK (directly or indirectly) sold off significantly.
2. Why would you assume you can't do better than an analyst, in your area of expertise? Someone who understands tech well will be able to make better tech investments, than, let's say, investments in mining. That seems pretty obvious to me. That doesn't means you'll always get it right, but it does increase chances significantly.
1. Did they actually have zero exposure to the UK? There are knock-on effects. If many airlines had exposure to the UK and this oil company only sold to american airline companies, they still effectively have exposure to the UK. If this spring manufacturer had the majority of their deals with that oil company, then they're going to suffer with them. I'm not saying you're wrong. I used the same hypothesis to buy on Brexit panic, but I don't know if it was correct.
2. Honestly, the analysts got it wrong in their own area of expertise often enough that I don't think it makes sense to pretend they're oracles in comparison to anyone else.
Markets are efficient because you cannot effectively predict how long emotion, greed, and irrationality will drive the bus before rationality once again prevails.
The efficient markets hypothesis alone isn't falsifiable. You need a model of information and how it interacts with prices: this gives you a so-called joint hypothesis. The joint hypothesis is merely extremely difficult to falsify.
I'm not saying it's not very hard to make money by trading. But be aware that you can't just assume efficient markets and have done with it.
This is very dangerous advice because it just ain't true. Under efficient markets, you can do equally well as "any wall street analyst"