Doing the Opposite With Contrarian Investing
Did you ever want to go back in time, and just do the opposite of what you actually did? Well then maybe you should become a contrarian investor. A contrarian investor is someone that prefers to do the opposite of what everyone else is doing. These investors search for well-known companies that mainstream investors have forgotten about.
In the 1990's when other investors were buying the high-flying technology stocks contrarian investors stayed away from them. After these stocks crashed, contrarian investors waited in the wings and then bought up shares in companies like Xerox. This was based on the fact that Xerox was a sound company that other investors had fallen out of favor with even though it would rebound.
This type of trading involves a lot of fundamental analysis to figure out which companies will actually rebound, even though many other investors currently want nothing to do with it. Contrarian investors also love it when the media talks bad about a well-known company. This is because it will more than likely cause some investors to sell shares in a panic so lower the price of an other-wise sound company.
I personally agree with some aspects of the contrarian investors mind. I think chasing and believing news stories about stocks that everyone else is chasing too; is one of the worst ways for an average investor to make their investment choices. A contrarian investor has much more discipline and patience than an average investor who is just following the crowd. With that being said, many people simply will find it difficult to adapt into the contrarian investors mindset because people tend to follow the crowd. It is hard for a simple investor to buy a stock that no one else appears to have a desire to own. However, if you have been following the crowd and getting burned with your investments; then maybe it is time to start doing the opposite of what everyone else is doing.
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