Information-less trades

Information-less trades

Informationless trades demonstrate how traders can make investment decisions without acquiring new information by either reallocating their wealth based on preferences or market conditions or implementing investment strategies based on existing data and patterns.

What is an information-less trade? 

Information-less trades arise from either a wealth re-allocation or the adoption of an investing plan that relies only on current knowledge. For instance, an investor may sell a significant block of stock not because he has knowledge that leads him to believe the stock’s value will decrease but because he may require the cash for another investment. 

Understanding information-less trades 

Information-less trades refer to trades executed without new information or market intelligence. These trades can occur for two reasons: re-allocating wealth or implementing an investment strategy based on existing information.  

In the case of re-allocating wealth, investors may choose to shift their investments from one asset class to another without any specific insight or knowledge about the prospects of those assets. This re-allocation is typically driven by factors such as risk appetite, diversification, or changes in market conditions.  

For example, an investor may decide to sell a stock and purchase bonds simply because he believes that the bond market is more favourable at that particular moment. This type of trade relies not on new information but on the trader’s perception and preferences. 

On the other hand, information-less trades can also occur when an investor follows an investment strategy that is solely based on existing information. This means he makes trading decisions based on publicly available data, such as historical performance, financial statements, or market trends. These trades do not involve any new insights or analysis that could give the investor an edge in the market.  

For instance, a trader may use moving averages to identify potential entry or exit points for a particular stock. While this approach does not involve new information, it leverages existing data and patterns to guide trading decisions. 

Instead, he assumes the current information is sufficient to make profitable investment decisions. Overall, information-less trades are common in financial markets and can be driven by various factors and strategies. 

Example of information-less trades 

One real-world example of information-less trades can be seen in the case of index funds. Index funds are a type of investment strategy that aims to replicate the performance of a specific market index, such as the S&P 500.  

These funds do not require active buying or selling decisions based on new information or market analysis. Instead, they allocate the investor’s capital across the index’s constituent stocks in proportion to their weighting. This re-allocation of wealth is based on existing information about the composition and performance of the index. An investor who chooses to invest in index funds is essentially making information-less trades, as he is not actively seeking out new information or making investment decisions based on it. 

Another example of information-less trades can be observed in the case of dividend reinvestment plans, or DRIPs. DRIPs allow shareholders to reinvest their cash dividends into additional company stock shares automatically. This investment strategy is based on the existing information that the company is paying out dividends and the belief that reinvesting those dividends will lead to long-term wealth accumulation.  

A shareholders participating in DRIPs is making information-less trades, as he needs to actively analyse new information or market trends to make investment decisions. Instead, he is implementing a strategy that acts solely on existing information about dividend payments and the potential benefits of reinvesting those dividends. 

What is insider trading? 

The illegal practice of buying or selling shares or other types of securities based on significant non-public information is known as insider trading. Individuals who possesses access to private data about a corporation may use that knowledge to make transactions for their gain.  

Insider trading is regarded as a breach of trust and an infringement of securities regulations since it gives people with secret knowledge an unfair advantage. It jeopardises the financial markets’ integrity and provides an unequal playing field for other investors.  

Regulatory authorities such as the Securities and Exchange Commission, or SEC, aggressively monitor and investigate insider trading cases to ensure market transparency and safeguard investors. 

What is a loss in trade? 

A loss in trade refers to the financial deficit incurred by a business when the cost of goods sold exceeds the revenue generated from sales. It is a regular phenomenon in business and can be driven by various variables such as poor sales volume, high manufacturing costs, or unfavourable market circumstances.  

A trade loss can negatively influence a company’s profitability and long-term viability. Businesses must regularly evaluate their financial performance, use cost-cutting techniques, or diversify their product offers to minimise losses. Controlling and reducing trade losses is critical for any company’s long-term performance. 

What are the benefits of information-less trades? 

One primary benefit of information-less trades is the potential for cost savings. Investors who engage in such trades can avoid the costs of gathering and analysing additional information, such as research reports or expert opinions. This can result in lower transaction costs and higher overall returns for investors. 

Further, information-less trades can contribute to market stability by reducing the impact of speculative trading. The market becomes less susceptible to sudden fluctuations and excessive volatility when trades are based solely on existing information rather than speculative bets on future events. This can create a more stable and predictable investment environment, which benefits individual investors and the broader economy. 

What are the advantages of information-less trades? 

One of the main advantages of information-less trading is the potential for increased efficiency in the financial markets. By allowing trades to occur without additional information, these transactions can be executed quickly and smoothly, reducing delays and minimising market inefficiencies. 

What are the disadvantages of information-less trades? 

Information-less trades carry a higher level of risk as they do not consider any new or updated information that may impact the market. This lack of information can result in missed opportunities or poor investment decisions.  

Additionally, information-less trades can lead to a lack of diversification in an investor’s portfolio. By not considering new information or exploring different investment options, investors may miss out on potential gains and expose themselves to unnecessary risks. Relying solely on existing information for trades can limit an investor’s ability to make informed decisions and maximise returns. 


Related Terms

    Read the Latest Market Journal

    Back in Business: The Return of IPOs & Top Traded Counters in March 2024

    Published on Apr 17, 2024 145 

    Start trading on POEMS! Open a free account here! At a glance: Major indices continue...

    Weekly Updates 15/4/24 – 19/4/24

    Published on Apr 15, 2024 43 

    This weekly update is designed to help you stay informed and relate economic and company...

    From $50 to $100: Unveiling the Impact of Inflation

    Published on Apr 12, 2024 132 

    In recent years, inflation has become a hot topic, evoking strong emotions as the cost...

    Japan’s Economic Resurgence: Unveiling the Tailwinds Behind Nikkei 225’s Record Leap

    Published on Apr 11, 2024 79 

    Source: eSignal, Intercontinental Exchange, Inc. In the heart of Japan’s economic landscape, the Nikkei 225...

    Weekly Updates 8/4/24 – 12/4/24

    Published on Apr 8, 2024 106 

      This weekly update is designed to help you stay informed and relate economic and...

    What Makes Forex Trading Attractive?

    Published on Apr 2, 2024 188 

    In a world where the click of a button can send goods across oceans and...

    Weekly Updates 1/4/24 – 5/4/24

    Published on Apr 1, 2024 97 

    This weekly update is designed to help you stay informed and relate economic and company...

    How to soar higher with Positive Carry!

    Published on Mar 28, 2024 135 

    As US Fed interest rates are predicted to rise 6 times this year, it’s best...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066