The main reason most so-called contrarians loose is because they think they know everything there is to know about investing and secondly more importantly most of them are nothing but fashion contrarians. What is a fashion contrarian? Someone who thinks its cool to try to act like a contrarian but when the going gets tough, they fold like a deck of old tattered cards.
How does one become a Fashion Contrarian?
These chaps woke up one day, read a random article on the subject, it tickled your fancy and decided to adopt the title of contrarian without having a clue of what it means to be one. Contrarian investing is not about being hip, cool, or trying to be different. You have to be different; you have to understand that following the masses is a recipe for disaster. Fashionable goes against everything real contrarians believe in.
When it comes to investing in the stock market; your key area of focus should be looking for investments that have fallen out of favour with mainstream investors. Buy when the masses are panicking and panic when the masses are Jubilant.
Don’t focus on so-called contrarian websites because most of them are full or rubbish; they just tout anything that appears to look contrarian but in most instances are not willing to back their stance with their money. Most of these sites are nothing but spin doctors; in other words, they are just repackaging old ideas and marketing them as new concepts. One simple rule of thumb to follow when it comes to investing in the market; when the crowd is eagerly embracing an investment, the best option is to sell your position and look for a new investment.
A strategy is far superior is based on the concept of mass psychology; this takes the game of investing to an entirely new level. Students of Mass Psychology do not close a position out just because the crowd has jumped into the investment; they wait for the waggon to get to the point that it’s almost ready to buckle under its payload before jumping ship. In other words, they wait for emotions to hit the boiling point before abandoning the boat.
Simple clear and concise principles to keep in mind
Never follow mass media
Trying to get investment ideas from mass media outlets is tantamount to asking an alcoholic how to quit drinking? You won’t get anything of value, and 90% of the information will most likely harm you. These sources should serve as guidelines for what investments to avoid as opposed to getting into
Don’t work with Groups or Join Groups of like minded Individuals
Teamwork does not pay when it comes to the stock market; in most cases, the saying misery loves company comes to mind. If you are seeking approval from then, odds are stacked against you. The crowd is always on the wrong side of the markets
Warren Buffets Mantra of buying and Holding Forever is total rubbish
You will never get the special deals he gets and he is playing with other people’s money and you are not. There is buy and hold for some time and then fold and open a new position. However buying and holding forever is for the fishes.
Do not fall in love with your investment
You need to be indifferent; it’s just a piece of paper; when the trend comes to an end, close your position and move on. Look for greener pastures.
Don’t fixate on Experts
Contrarian investors do not rely on experts to help them arrive at a decision. They already know what they want and have a list of stocks they want to buy. All they are waiting for now is the right moment to strike; this could amount to the stock pulling back to a certain entry point or for key technical indicators to trigger a buy signal, etc.
Other Articles of Interest
America’s 21st Century Energy Story ( Feb 10)