There are basically two kinds of people in financial markets:
1. Investors.
2. Traders.
An investor accumulates stocks for the long term. He buys them based on value and/or paying dividends. This is much like a property investor with a long term view, investing with appreciation in mind. This is like marriage.
A trader is more short term, looking for in-and-out profits, 30-50% profit, and then bails. You’ve seen many strategies like this in the course too. This is more like dating than marriage!
So which one do you want to be?
You can be both. You can do married dating…
The financial market contrarian is a hybrid of the two strategies. He has a long term view (waiting for the market- the elastic band- to inevitably snap back the other way), but he’s also concerned with selling for profit when the time is right- he’s not married to the situation forever.
And let’s look back to the bitter winter of 2008/9, the depths of a frightening financial crisis when world-class stocks were being given away for ludicrously low amounts.
Would you have bought then? Could you have overcome the irrational fear, nay panic, that had gripped everyone?
If you had bought in March 2009, you’d have doubled, tripled, or even quadrupled your money by now with very little risk on safe, world-dominating stocks. I mean, people aren’t going to stop drinking Coca-Cola or going to MacDonald’s, right? But when the market thinks the world’s about to go ‘I am Legend’, all logic goes out the window…
And doesn’t that throw the whole idea of risk and reward in its head?!
We’re told that if you want high reward you have to take high risks. And if you want low risks then you have to accept low rewards.
But now you know that isn’t true. You only have to look at the 2009 example to expose this lie. Buying rock-solid stocks at bargain-basement prices is NOT low risk, in my opinion! And yet the rewards were HUGE.
So a true contrarian would have cleaned up from this if he’d have had the nerve, the capital, and had timed it well.
This is the principle of contrarianism, and this is how it’s supposed to work. With hindsight it seems so simple. But when you’re actually sitting there in the rain and someone’s trying to sell you a bucket of water it’s not so simple.
So let’s take our hindsight goggles off and take a closer look at that winter of 2008/9. Was it really a no-brainer for the iron-nerved contrarian to clean up back then?
If you recall, in late 2008 the meltdown was in full swing. The Dow Jones ended 2008 at a bombed-out level of 8776, down from above 14,000 at the high.
Back then, a contrarian could’ve dived in and picked up bargains…
But by March 2009, the Dow Jones had sunk even lower to below 6,500.
Timing is everything. Predicting market events with 99.9% certainty is relatively easy. When that event happens is the key.
Contrarianism virtually ALWAYS works. But we can’t say WHEN, and how much pain you’ll suffer waiting for the market to eventually correct itself.
The BIG disadvantage of contrarianism is that it needs TIME to come good. It’s all about timing, and that’s the big secret that my Stock Code Breaker course gives you.
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