If you are wondering about what types of thoughts a “contrarian” investor might have, think in exact terms of the word “contrary.” Basically, if you say “pull,” I’m gonna “push.” If you say “yes,” I’m going to say “no.”
So, carry that idea into trading. Does the local cable network investment guy say “buy?” If so, I, the contrarian, am bound to “sell.”
Anyway, the first time I remember thinking that some people would go “against the tide” when it comes to money and investing, it was during the old feel-good movie “It’s a Wonderful Life,” where James Stewart’s character, George Bailey, is fending off a bank run just as the Great Depression has the nation in its grips. His nemesis, Mr. Potter, the mean and greedy banker who pretty much runs the town, is trying to destroy the Bailey Savings & Loan (which is the idealistic company trying to help the community).
During a point in the movie, the community is in a panic, and everyone is trying to sell their shares and cash out. George Bailey urges them not to do this. “Don’t you see what’s happening? Potter isn’t selling. Potter’s buying! And why? Because we’re panicky and he’s not. That’s why. He’s picking up some bargains…” etc. Of course it all comes out okay in the end (except that at the end of the movie, Mr. Potter is not held accountable for his ickyness, but that’s another topic altogether).
But, while that’s not really a true or even good example of contrarian investing, it struck me early on that there were people out there who were not afraid to act completely against the prevailing opinion. Yes, it was a fictional movie, but it spurred my thought process.
So, my warning of course would be to not just go against the advice of a professional willy nilly without learning first what you are doing! Education when it comes to investing is critical. With that said, let’s educate ourselves!