The Contrarian Investor
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business strategy
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date published 03/05/2008
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SummaryInvesting
The average every day investor is likely to follow the trend of investor’s market-wide. Most investors look at what the market is doing and will follow the trend. If everyone is buying a stock and the price is rising, people buy. If everyone is selling a stock and the price is dropping, people will sell. With the onset of the popularity of the Internet and real-time quotes at everyone’s fingertips, investors watch the market and make snap decisions based on what they see the price of a stock is doing. When the couch potato investor sees the price of a stock rising or falling, they will jump on the bandwagon and do the same thing everyone else is doing. Even the more seasoned investor is more likely to follow the trend of the market in making decisions about buying or selling. They will do the research and watch the price of the stock and buy or sell even though the price might be overvalued or undervalued. I think this might be because they are riding the wave of all the novice investor’s and are hoping they are smart enough to jump off the bandwagon before it crashes. Unfortunately, this does not always work, as evidenced by the recent decline in most tech stocks and the enormous amounts of money lost by investing in them. This herd mentality or follow the leader mentality has bred a type of investing that, although not extremely popular, can be very profitable. This type of investing is called Contrarian Investing.
Key Words- Contrarians, buying, selling, stocks, stock-markets, Short Sale Position and Put-call ratio
The average every day investor is likely to follow the trend of investor’s market-wide. Most investors look at what the market is doing and will follow the trend. If everyone is buying a stock and the price is rising, people buy. If everyone is selling a stock and the price is dropping, people will sell. With the onset of the popularity of the Internet and real-time quotes at everyone’s fingertips, investors watch the market and make snap decisions based on what they see the price of a stock is doing. When the couch potato investor sees the price of a stock rising or falling, they will jump on the bandwagon and do the same thing everyone else is doing. Even the more seasoned investor is more likely to follow the trend of the market in making decisions about buying or selling. They will do the research and watch the price of the stock and buy or sell even though the price might be overvalued or undervalued. I think this might be because they are riding the wave of all the novice investor’s and are hoping they are smart enough to jump off the bandwagon before it crashes. Unfortunately, this does not always work, as evidenced by the recent decline in most tech stocks and the enormous amounts of money lost by investing in them. This herd mentality or follow the leader mentality has bred a type of investing that, although not extremely popular, can be very profitable. This type of investing is called Contrarian Investing.
Key Words- Contrarians, buying, selling, stocks, stock-markets, Short Sale Position and Put-call ratio
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