By MOFSL
2023-09-23T05:55:29.000Z
4 mins read
A Guide To Contrarian Investing Strategy
motilal-oswal:tags/derivatives-trading,motilal-oswal:tags/future-and-options,motilal-oswal:tags/futures-and-options-trading
2023-09-23T05:55:29.000Z

Contrarian Investing Strategy

Contrarian investment strategy approach is upon the basis of thorough research of the majority of market participants that mislead the prices of assets and exhibit herd mentality. It requires a deep understanding of market trends and patience.

What is Contrarian Investing?

It is one of the investment styles where investors look for profitable opportunities by going against market sentiments. Contrarian investors enter the market when others exist and exist when others are entering. It requires a long-term perspective, patience, and an ability to identify pockets of opportunities between negative market sentiments.

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This investment strategy is adopted by long-term investors. These investors study any movement in the market to determine the direction of the herd investors and move exactly opposite to them. It can be applied to entire markets, individual stocks, or even to an industry as a whole. The decisions made in contrarian investing are planned actions backed by intensive market research. This investment strategy requires a thorough understanding of the stock market. Even the smallest neglect of details can end up losing a pile.

Fundamental Principles of Contrarian Investing-

The principles of contrarian investing concentrate on identifying overvalued and undervalued assets and inefficient market sentiments. A successful investor is willing to try to dedicate time to evaluate market trends and conditions long-term. These investors are not in search of short-term gains.

Contrarian investors aren’t looking for short-term gains. They identify opportunities where the majority opinions are wrong, and their investment will pay off while the herd investors readjust their outlook. This investment strategy offers above-average returns while involving some risks, such as short-term losses and mistiming the market.

Characteristics of Contrarian Investing-

Conclusion

Contrarian investing offers above-average returns and minimises exposure to market bubbles. But it also involves risks if the market research is not thorough. Investors navigate every challenge and then make informed decisions. They spend time evaluating market, go against prevailing market sentiments to generate profits. Practising a contrarian investing strategy provides exposure to stock market conditions and diversifies risks.

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