The Iran War offers three fundamental lessons about investing during geopolitical events.
Each of which I’ve discussed in prior blogs, but they’re worth repeating because most investors ignore them.
Lesson 1: Geopolitical Chaos Creates Opportunity
“Wait,” you might be thinking. “Isn’t it immoral to profit when others are suffering?”
That’s a personal question guided by your own moral code.
But here’s the reality: markets are going to move whether you participate or not. The question isn’t whether it’s moral to profit. The question is whether you want to be the person who understands what’s happening or the person who gets caught off guard.
Almost every conflict or disaster throughout my investing lifetime has presented clear trading opportunities.
When the news is bleak and everyone is wringing their hands in hopelessness, that is when I buy quality stocks or broad-based ETFs.
I don’t try to time the very bottom. I don’t worry about catching a falling knife.
I buy when the stock markets are down and the tendency is to sell or panic.
Chances are, the markets will recover from the declines precipitated by the geopolitical event.
Case in point: the Iran war. Yesterday, the S&P 500 hit a record high, having more than recovered from its almost 10% decline just two to three weeks ago.
Lesson 2: Position Sizing Matters More Than Timing
Here’s what most people get wrong.
They wait and wait for the “right moment” to buy. Then when things look truly terrible, they either freeze or go all in.
Both are mistakes.
I don’t deploy all my capital at once during a crisis. I use what traders call “dry powder” strategically.
When markets drop 8 to 10 percent, I typically deploy 20 to 30 percent of my available cash. Not everything. Just enough to start building positions.
If things get worse and markets drop further, I have capital left to add more.
If markets recover quickly, I’ve participated in the upside without overcommitting.
This approach removes the pressure to be perfect. You don’t need to catch the exact bottom. You just need to be disciplined about how much you commit and when.
The goal isn’t precision. The goal is participation without recklessness.
Lesson 3: Prepare for Unintended Consequences
Geopolitical events never resolve cleanly.
They create ripple effects that are difficult, often impossible, to predict in advance.
Consider 9/11. The attacks themselves were devastating. But the unintended consequences, the prolonged wars in Iraq and Afghanistan, created secondary market impacts for years.
Or the 2008 financial crisis. It didn’t just affect banks. It triggered political instability across Europe, reshaped entire economies, and changed monetary policy for over a decade.
The Iran situation will be no different.
We don’t know what the second-order and third-order effects will be. But we can predict with high confidence that they will come.
Some of these unintended consequences might propel stocks higher. But often they drive the indexes lower.
This is why I keep capital in reserve even after I start buying. Because the initial event is rarely the final event.
While each market-moving situation needs to be evaluated on its own merits, steep declines driven by geopolitical chaos should present both long-term investing and shorter-term trading opportunities.
Yes, good stock market times will return again. But you need to be positioned to take advantage of them when they do.
These Are Not Laws
Are these lessons formulated as trading or investing laws?
No.
Investing isn’t physics. You can’t reduce it to laws and formulas.
Investing and trading are human behaviors, influenced by all kinds of variables, many unanticipated, constantly evolving. They are also increasingly driven by algorithms and AI agents, which adds another layer of unpredictability.
All kinds of surprises can hit the stock market like a board slamming the back of your head that you don’t see coming.
But It’s Not All Randomness and Chaos
This doesn’t mean it’s all randomness and chaos.
The lessons learned from geopolitics are principles that succeed most of the time. They can be folded into your own investing or trading disciplines and strategies.
And this is the most important part of investing and trading: be guided by strategies and principles that you carefully develop and evolve over time, as the world continuously changes.
Not your gut feeling.
Not panic.
Not hope.
Strategy.
If you want to learn how to think about markets like this, how to manage risk during volatility, and how to build a system instead of reacting to headlines, that’s exactly what I teach inside Compounders Stock Market Academy.
👉 Learn more: www.compoundersacademy.com