What's the Trade?

When you see something absurd in the market, it’s helpful to ask, “What’s the trade?” How would you make money from it if it truly is absurd? Oftentimes, it’s not that straightforward and there is more to it than you think. This is a good check against biases and, if you truly believe that something is wrong, would you be willing to make the trade?

Read 15 Lessons From Newfound Research.

See also:

  • Every Portfolio Is Long Something and Short Something

    Every portfolio and every decision can be decomposed into being long something and short something. By weighting one area of the portfolio higher than another, you are short on the underweighted parts of the portfolio.