Stock Market Basics:Why contarian Investors nearly always lose

Stock market basics for beginners

A Contrarian Investor does not follow the Herd Sol Palha

Updated Feb 2023

A Contrarian Investor investor never follows the pack; he understands that the Pack Mentality regarding the Financial Markets is useless.

The main reason most so-called contrarians lose is that they think they know everything there is to know about investing. Secondly, more importantly, most of them are nothing but fashion contrarians. What is fashion contrarian? Someone who thinks it’s cool to try to act like a contrarian, but when the going gets tough, they fold like a deck of old tattered cards.

Stock market basics for beginners: Difference between Contrarian & Fashion Contrarian

These chaps woke up one day, read a random article on the subject, tickled your fancy and decided to adopt the contrarian title without knowing what it means to be one. Contrarian investing is not about being hip, cool, or trying to be different. You have to be different and understand that following the masses is a recipe for disaster. Fashionable goes against everything real contrarians believe in.

When investing in the stock market, your key 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.

Study the Mass Mindset

Please don’t focus on so-called contrarian websites because they are full of rubbish; they tout anything that appears to look contrarian but, in most instances, are unwilling 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 new investments.

A far superior strategy 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.

Stock Market Basics 101: Never follow mass media

Trying to get investment ideas from mass media outlets is equivalent to asking an alcoholic how to quit drinking. You won’t get anything of value, and 90% of the information will 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 seek their approval, the 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, then fold and open a new position. However, buying and having forever is for the fish.

Do not fall in love with your investment.

You need to be indifferent; it’s just a piece of paper; when the trend ends, 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, for now, is the right moment to strike; this could amount to the stock pulling back to a specific entry point or for key technical indicators to trigger a buy signal, etc.

Stock market basics for beginners: Adapt or Die