Don’t Be Afraid To Be A Contrarian—In his intro to investing book Nobody Knows Anything, author and stock analyst Bob Moriarty devotes an entire chapter to the concept of “contrarian investing.” The basic argument is that investing isn’t difficult, it just takes some common sense. However, most people follow the herd, and the herd by definition lacks common sense. So one should do the opposite of what the herd is doing. The lesson here is that just because everyone else is selling, that doesn’t mean you should be. To repeat: Nobody really knows when the market will rise or fall—so stop worrying about buying low and selling high and start looking at fundamentals. In the long run, the market rewards strong fundamentals.
How Long Will This Last?
Eventually, one of two things must occur: Either investor confidence will return to a level that actually matches the economy, or else the economy will slip to the level where investors think it is. Until then, savvy investors will continue to follow the strategy that the market dictates, not what the anonymous “investing community” believes is happening.
Christopher Crawford is a director of advisor relationships at Buffalo Funds in Mission, Kansas. Working with advisors for the last 10 years, he notes that success for advisors begins with being a good communicator and a better listener.