Don't Buy on the Rumor

Q: What is the rationale (if any) behind the phrase, "Buy the rumor, sell the news"? -- H.Y., Los Angeles

A: "Buy the rumor, sell the news." Ah, a tried-and-true phrase that makes its utterer sound oh-so-intelligent. Ultimately, we think that buy-and-hold investors aren't going to be too concerned with what the rationale behind the phrase is (it plays a bigger role in a short-term trader's stock moves), but let's take a quick crack at explaining it.

Oftentimes a rumor will circulate around a stock or a company. The rumor might be that the company is going to be acquired b