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Why Financial Calendars Are an Investor's Best Friend

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Don't overlook events that were clearly scheduled to happen.

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In Plato's Allegory of the Cave, a group of people are trapped inside a cave and believe all of reality exists inside the cave. However, one day a prisoner escapes to discover an entire world outside the infinitesimal dugout. The same phenomenon occurred to me when I first started referencing a monthly financial calendar: I instantly discovered a new set of important variables that existed beyond my awareness. This under-utilized discovery helped me reduce my risks and increase my rewards.

Like a horse with side blinders, most investors and traders tend to get sucked into provincial views. Investors become well acquainted with a specific company and everything happening in regard to that company. Traders tend to hone in on technicals, or on short time frames. However, we must have a reasonable bird's-eye view of all key financial events in order to reduce our risk to unforeseen (but totally scheduled) events.

For example, if you're invested in a specific stock, you must also know the earnings announcement dates for top competitors and any important industry conferences. Those who know about these events will be able to hedge risk by either exiting positions at these times or simply monitoring the events for new information and reactions. Those who ignore these events may wake up one morning with a hefty pre-market haircut to their portfolio like a hippie reporting to the barber at basic training camp for the Armed Forces.

Let's say you're invested in Research in Motion (RIMM). You've analyzed the fundamentals, just like Warren Buffett and Benjamin Graham. You have RIMM's earnings announcement date posted on your computer with more flare than your wedding anniversary. You've also emailed all your friends the dates when the newest Blackberry will be available. You're cruising like Maverick in Top Gun.

Then, one day at work, you take a quick peek online, only to see a dreaded red percentage posted next to Research in Motion's price change. You think, "How could this be? We're in a quiet period for important information." So, you frantically look around and realize the top 20 headlines are related to Apple's (AAPL) Worldwide Developer Conference. You click through and realize the new iPhone was unveiled, and it's going to be a Blackberry killer. This entire nightmare could have been avoided with a monthly financial calendar.

Personally, I like to look at each quarter ahead of time. I like to see where the Fed meetings are as well as economic-data releases. I want to know when top competitors or bellwethers are making important announcements. These events can have as equally a powerful effect on my investments as my holding's direct announcements. However, most investors overlook this basic information.

In the Allegory of the Cave, the main character simply had to turn around to realize the cave had an exit. In our case, all we must do is reference a financial monthly calendar to discover new critical variables affecting our investments. If you cannot find one online or through an investment banking analyst, take the time to make one from scratch. Once you walk into the light, you'll be in awe at all the new opportunities awaiting you.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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