What is a contrarian investor, who are some of the most famous ones and can I make money if I adopt this strategy?

Nick Sundich Nick Sundich, July 7, 2023

What is a contrarian investor?

Are they nobodies on the fringe of the market? Or are they the prophets you should always listen to?

They’re certainly not nobodies. Some of the most famous investors of all time are contrarians. But the second question is more complicated – in doing so, you are ironically not being a contrarian at all.

 

 

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What is a contrarian investor?

A contrarian investor is an investor who takes the opposite view of the prevailing market sentiment. They look for companies that are out of favour with investors and attempt to buy their stock at a low price expecting that, over time, the stock price will rise.

Contrarian investors often focus on fundamentals such as cash flow, earnings and balance sheets, rather than technical indicators or other short-term factors. Contrarian investors believe that they can benefit from market irrationality by purchasing stocks when most others are selling and vice versa.

Contrarians often have a long-term investing horizon which allows them to ride out the highs and lows in the stock market until they reach their desired outcome.

 

Who are some of the most famous contrarian investors of all time

Contrarian investors are those who take a different approach to investing, often going against the popular trend or opinion. Some of the most famous contrarian investors of all time include Warren Buffett, John Bogle, and George Soros.

Warren Buffett is one of the greatest investors in history, having amassed a net worth of tens of billions of dollars through smart investments and savvy business dealings. He is well known for his contrarian investing style – going against popular opinions and trends in order to make big profits on his investments. He famously invested in undervalued stocks and businesses that other investors had written off as unprofitable, untenable or just boring businesses that others thought would just stagnate rather than grow.

John Bogle is the founder of Vanguard Funds, one of the world’s largest asset management companies. He was a proponent of index funds – investing in a wide variety of stocks from multiple industries rather than putting all your eggs into one basket by buying individual stocks. This was considered a contrarian strategy at that time because it was not widely adopted by other asset managers.

George Soros is an investor who rose to fame thanks to his successful trades during the 1992 Black Wednesday financial crisis in Britain. His actions earned him a reported $1 billion dollars in profits at the time and made him one of the most famous contrarian investors ever.

He relied on his own analysis to make educated bets against popular financial trends, often profiting handsomely from them when they pay off as expected.

 

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So how can I become a contrarian investor?

To become a contrarian investor, you must first recognise the opportunities that exist when the majority of other investors are neglecting certain aspects of the market. This means taking an active approach to research and analysis, rather than simply following the herd.

Don’t take our word for it.

 

 

To do this, investors should focus on uncovering undervalued assets and seeking out historical patterns of buying opportunity, such as low price-to-earnings ratios or areas where there is potential for dramatic growth. Additionally, understanding the risks associated with contrarian investing can help ensure that these decisions are made with a clear understanding of both reward and risk.

This type of investing also requires patience and discipline to keep emotions in check during bear markets. Many novice investors (contrarian and otherwise) can be swayed by short-term dips or corrections in stock prices; however, true contrarian investors understand that long-term trends are what create sustainable wealth over time. Moreover, it’s important to build a diversified portfolio that includes multiple asset classes in order to spread out risk while mitigating volatility.

Lastly, a successful contrarian investor must have the confidence to stick with their convictions despite media hype or popular opinion among other investors. This mindset will help them stay focused on attaining their long-term goals without being swayed by fear or excessive optimism in uncertain times.

 

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