Think beyond the obvious – Consider Contrarian Investing

Apparently, the term ‘contrarian’ means doing something that is different from the usual perception. It is a deviation from the normal which is not really readily acceptable at all times. But, in the investment world, being contrarian often yields good results. The effectiveness of investment is solely dependent on the amount of return it can generate. A contrarian investor always acts in counter-point to the prevalent market trend. In contrast to the contrarian investor, you have the fundamental or the value investor. He goes for a purchase or sale depending on the price of the assets in relation to their intrinsic value.

In contrarian investing, the investment strategy is devised on the fact that there is likely to be a negative serial of the co-relation of the prices. It is more-or-less a predictable guess that once the prices have gone up, they are sure to come down. Here, a certain aspect of the investors’ psychology comes into play. The investors are usually found to move in a herd-like behavior. In contrarian investing, the focus lies on this particular aspect.

It believes in independent action and negates this attribute of mass pessimism or optimism. It is intellectual independence blended with agnosticism with regard to the consensus views. Further contrarian investing deals with broad strategies instead of just focusing upon specific investments. Timing of the actions is perhaps the other most important factor. You can have contrary reactions that are favorable to the same challenge.

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