Definition
Contrarian investing involves deliberately going against prevailing market sentiment - buying when others are fearful and selling when others are greedy. Contrarians believe markets overreact to both good and bad news, creating opportunities. This strategy requires strong conviction, patience, and the ability to withstand periods of underperformance while waiting for the market to recognize value. Famous contrarian investors include Warren Buffett ('Be greedy when others are fearful') and Howard Marks.
Example
During 2009's market bottom, when headlines were uniformly negative and investors fled stocks, a contrarian bought quality companies at multi-year lows. While painful initially, this produced exceptional returns as markets recovered.
FAQ
What is Contrarian Investing?
A strategy of going against prevailing market sentiment.
Why is Contrarian Investing important?
Contrarian Investing helps investors evaluate investment strategies and make more informed decisions.