Contrarian Investing: What You Need to Know
Think differently as an investor
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Are you the type of person who looks at others and tends to start thinking about sheep? Then you’re probably someone who’s looking to break away from the herd. Of course, that doesn’t mean you don’t have the same goals as other people. The sheep want to make a lot of money, and so do you. But while the ultimate material goal might be similar, your way of going about it might be completely different.
What a lot of people don’t realize when they start looking into investment is that they can break away from the herd. The investment game has many more paths to take than you might think. If you’re purposefully looking to contradict popular thought, then you’re a contrarian. And this mode of thinking can be taken into your investment methodology.
Welcome, then, to the world of contrarian investing.
Buying and selling shares
One of the top methods of a contrarian investor is something that perfectly defines what a contrarian investor is. The method? To sell when everyone ones to buy and buy when everyone wants to sell. This sounds like a complete fool’s game to many investors. But it actually makes a lot of sense, when you think about it.
Everyone should agree that a good investment strategy is to buy an asset when it’s cheap, and to sell it when it’s worth a lot. But to do either of these things is to be in fundamental disagreement with the majority of the market. The most successful investors in the world have often been in this position.
Ignoring all investment advice?
By definition, you would think that a contrarian wouldn’t bother listening to any advice. This is a mistake, however. Going against the grain doesn’t mean you go against the grain blindly, after all. Let’s say that everyone you know is a foreign exchange nut. But you’re more interested in something different - say, binary options. But going for binary options for the sole reason that they’re not Forex is definitely a mistake. You should have a more steady basis for want to making that choice. Smart players will still compare binary options to Forex carefully.
When you talk about a contrarian ignoring advice, we don’t usually mean that they ignore everything. What we mean is that they don’t strictly adhere to any particular investment philosophy. Of course, this can be contradicted by the fact that contrarian investing is, after all, an investment philosophy. But you should understand that contrarian investing is a pretty loose philosophy.
Is contrarian investing right for you?
Contrarian investing is, in many ways, the smartest way to go about investing. It’s very individualistic. You don’t rely on anyone else pointing you in the supposedly right direction. You do your own research and make independent decisions. That might sound like simple common sense, right? Well, the vast majority of investors don’t do research or independent thinking. Remember: most investors fail. So to do what they don’t do does make a lot of sense.
Of course, if you want to be a really hardcore contrarian? Then you’ll probably ignore all advice about contrarian investing, including this article. Whether or not that’s a wise move is something I should probably leave you to discover.
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