Contrarian Investing
This is an investment philosophy that involves going against prevailing market sentiments/trends by buying poor performing assets in the hope of selling them at a profit in future - taking a contrarian view.
The basic premise being that market sentiment is bullish when most people have already invested and have negligible purchasing power left, which means that the markets can only go down, similarly when a bearish sentiment persists most people have already sold out and hence the markets can only go up. The same would apply to individual securities as well i.e. a contrarian investor would tend to spot securities that are either neglected or do not happen to be the current ‘hot’ sectors as this methodology focuses on the actual value associated with a company/asset rather than just judging it by current market movements.
Many maverick investors such as George Soros, Marc Faber etc. are associated with this investment style and many Indian investors are also adopting the same, with mutual funds taking the lead and as many as eight of them launching ‘contra funds’ in the last few years.
Tags: Daily Funda