© 2014 wheresjenny.com Contrarian investing

© 2014 wheresjenny.com Vocabulary A contrarian: is one who attempts to profit by investing in a manner that differs from the conventional wisdom, when the consensus opinion appears to be wrong. Conventional wisdom: It is the body of ideas or explanations generally accepted as true by the public or by experts in a field. Bear market: A bear market is a general decline in the stock market over a period of time. Value investing: value investing has taken many forms since its inception, it generally involves buying securities that appear under priced by some form of fundamental analysis.

© 2014 wheresjenny.com What is contrarian investing? A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricing in securities markets. For example, widespread pessimism about a stock can drive a price so low that it overstates the company's risks, and understates its prospects for returning to profitability. Identifying and purchasing such distressed stocks, and selling them after the company recovers, can lead to above-average gains.

© 2014 wheresjenny.com 5 Rules Of Contrarian Investing 1. When you read about it in the newspapers or see it on the news, it is already all over This is a hard thing to write as a journalist but sadly it takes so long for news to hit the mainstream it is useless beyond entertainment. In a world where market news moves prices in sub-seconds, tomorrow’s front page or tonight’s newsflash or even this evening’s Internet news is too late to help or save the trader. The market has repriced before it gets past the specialist wires. So you can forget following the main stream media news or worrying about what it has to say, the price has already embraced that.

© 2014 wheresjenny.com 2. Buy when everyone wants to sell and sell when everyone wants to buy To buy cheap and sell dear you have to be in fundamental disagreement with most of the other players in the market. You will be passing your stock baby onto some putz at the top of the market and liberating some cheap gem at the bottom of the market from some hapless loser. The people you buy and sell to don’t share your investment strategy and at that moment, whether it’s the top or bottom of the market, the game is full of fools. The thing is, they think you are the dunce or why else would they deal.

© 2014 wheresjenny.com 3. No one sees a bubble when their income depends on it Time and again, the market ignores bubbles because no one can afford for them to burst. To be truly contrarian you could say, no one stands up for the truth when their daily bread comes from an edifice of lies.

© 2014 wheresjenny.com 4. Don’t take tips or advice and don’t believe research notes Opinions are like belly buttons, everyone has one. Focus on your own research to have your own opinion. The market doesn’t pay people to agree with each other or regurgitate someone else’s ideas. It will pay you to be right when not enough people see the real picture. If everyone is on the same page, the price is right.

© 2014 wheresjenny.com 5. What is obvious to you is not obvious to others The world simply does not catch on fast to hidden variables. If you have a contrarian point of view you are sure is right, don’t expect the world to hear angelic choirs and for there to be a sudden catharsis. If you are right, the predicted outcome will take a lot longer to happen than you think. Allow a very long time indeed. By the time you read all about it in the papers and everyone is shouting it from the rooftops, the contrarian will be looking to reverse and the cycle will begin again.

© 2014 wheresjenny.com Exercises: Fill in the blanks: 1)When you read about it in the newspapers or see it on the news, it is ________ 2) Buy when everyone wants to sell and sell when everyone wants to ______