Friday, August 19, 2016

Contrarian Investing

Morning ... still blur-blur. Reading about the selldown ... and the discussion in the morning.

There ... the four counters, actually. I missed out OFI.

There .. OFI.

Being CONTRARIAN is very difficult ... very very difficult as we have to against the majority --- the herd.

Take a look at AirAsia ... when it was at RM3, many will buy into her ... but it dived below RM1 ... not many dare to buy. Today trading at RM3.28 ... it is becoming a darling AGAIN. We shall watch together it dive back during crash. Watch AirAsia together ... and you will see how difficult it is to be CONTRARIAN. Buy at RM1, sell at RM3? yeah.... right!!

So ... I could write pages about contrarian as slowly 1MDB or Brexit forgotten and influx of retailers is back!!

Contrarian Investing by Investopedia

Contrarian investing also emphasizes out-of-favor securities with low P/E ratios. For more on indicators that contrarians monitor, check out the article "Why is the disparity index indicator important to contrarian investors?"

Contrarian investing is a type of investment strategy distinguished by buying and selling against the grain of investor sentiment during a specific time. A contrarian investor enters the market when others are feeling negative about it and the value is lower than its intrinsic value. When there is an overarching pessimistic sentiment on a stock, it has the possibility of lowering the price so low, the downfalls and risks of the company's stock are overblown. Figuring out which distressed stocks to buy and selling them once the company recovers, thus boosting the stock value, is the major play for contrarian investors. This can lead to securities returning gains much higher than usual. However, being too optimistic on hyped stocks can have the opposite effect.

Many contrarians have the view of the market as an eternal bear market. This does not necessarily mean they view the market as negative but keep a healthy skepticism as to how certain general investors feel about the market. Overly high valuations can lead to eventual drops when investors' expectations do not work out. The principles behind contrarian investing can be applied to individual stocks, an industry as a whole or even entire markets.

Well ... read more about CONTRARIAN investing, then we could understand better WHY majority of us will STUCK up there ... and during crash, we would not dare to BUY.

Emotional neutrality is the key. Only invest for coldly rational reasons, and never because other people are buying in droves and making money right now. Heated emotions, euphoria, excitement and similar sentiments are the enemy of prudent and profitable investing. Make sure that you do not get carried away with the crowd. In fact, it is generally best to do the diametrical opposite. When the crowd is cheering, leering and buying, look to sell; when it is moaning, groaning, panicking and selling, it is generally time to make your move.

Having a good, neutral advisor is a great help. Before taking the plunge – either in or out – ask informed friends or brokers who can be trusted for their advice. Objective third parties are invaluable in ensuring that you don't get carried away or become imprudent in the face of peer pressure and temptingly high, but unreliable and unstable, returns. Indeed, if you have a broker, his or her job – either ethically or even legally – is to ensure that you never join the proverbial queue of lemmings at the edge of a cliff.

Make this our weekend read and think about it. Not many people out there will write about doing things opposite (Contrarian) as it is not popular. To be popular, we supposed to write about what OTHERS (the herd) want to read.

Time to go shopping with wife ... celebrating our 11th year!


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