Rule #6: Know When to Be Long and Dumb

Trading Rules Series

The reality of making money in markets is that taking risks and being long assets pays off. It would be great to make money without being exposed to any betas, but that's not how it works. At some point, you have to let go of your ego and accept the collective knowledge of the market if you want to be successful.

It's easy to get lost in trying to gain a deep analytical edge when investing, but sometimes it's best to just join the party and see where it takes you. Investing first and investigating later is a strategy that Soros and Drunkenmiller advocate. Flexibility is crucial when adopting this approach, but you can't over-manage your positions. It's important to give investments time to work, let the narrative play out, and then move on. Being long during a bubble or parabolic move is an opportunity to make a lot of money in a short period of time. Don't overthink it; go with the flow and own the moves that might not necessarily “make sense.”

If you hear a lot of noise in the market, listen to what the experts are saying, especially if they're warning about potential risks. However, always keep in mind the main factor driving the market as a whole and compare it to the insights you've gathered. Don't let fear take over, as it's the biggest cause of underperformance. Don't let your fear of being wrong stop you from taking risks and making investments that could bring you great returns.