never catch a falling knife

N

never catch a falling knife (metaphor)
/ˈnɛvər kæʧ ə ˈfɔlɪŋ naɪf/

Meaning

  • The phrase advises against purchasing securities that are experiencing a rapid decline in price, as they may continue to fall further.
  • It warns against acting impulsively in a worsening situation, as it may lead to greater harm in general life.
  • It cautions investors to avoid attempting to time the market by buying assets during sharp downturns, since predicting the bottom is challenging and losses may accumulate.
  • This expression warns that intervening in a swiftly declining market can be perilous, much like trying to catch a falling knife, which can lead to injury.

Example Sentences

  1. Experienced traders know to never catch a falling knife, as it often leads to significant losses.
  2. During volatile markets, financial advisors remind clients to never catch a falling knife to avoid premature investments.
  3. Seeing the company’s stock plummet, she recalled the saying to never catch a falling knife and decided to wait.
  4. Analysts warned investors to never catch a falling knife amid the sector’s downturn.
  5. He learned the hard way why it’s wise to never catch a falling knife after his hasty investment resulted in losses.

Origin and History

The phrase “never catch a falling knife” is a metaphorical expression that likens the act of buying a rapidly declining stock to the physical danger of catching a falling knife. Attempting to catch a knife in mid-air poses a high risk of injury, just as purchasing a stock in freefall can lead to significant financial losses. This vivid imagery effectively conveys the peril associated with hasty investment decisions during market downturns.

Introduction into Financial Lexicon

The exact moment when this phrase entered the financial lexicon is not definitively documented. However, its usage has become prevalent among traders and investors to caution against the dangers of attempting to time the market during sharp declines. The metaphor serves as a stark reminder of the potential hazards in trying to predict the bottom of a market drop.

Earliest Recorded Usage

While the precise origin within financial contexts remains unclear, the metaphorical use of “falling knife” appears in literature as early as 1919. In Harry Johnston’s novel The Gay-Dombeys, a character advises, “Never catch a falling knife or save a falling friend!” This suggests that the imagery was in use in English literature in the early 20th century.

Adoption in Financial Markets

Over time, the phrase has been widely adopted in financial markets to describe the risk of buying into a declining asset without clear signs of stabilization. Financial advisors and analysts often use this adage to warn investors against premature entries into falling markets, emphasizing the importance of waiting for confirmation of a trend reversal before making investment decisions.

Synonyms

  • don’t try to time the market.
  • avoid bottom fishing.
  • steer clear of falling stocks.

Variants

  • don’t try to catch a falling knife.
  • avoid catching a falling knife.
  • catching a falling knife is dangerous.

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