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Investing in stocks
By Jeff Lakie
There have been a lot of books written on how to be a smart investor
and how to time the market. In fact, many people make a living on
developing a "system" to time the market and then sell that system to
other people. While there are a lot of indicators that can tell you when
to invest and when to get out, one excellent way to invest is to be a
"contrarian investor."
A contrarian investor means that you are doing the opposite of what
other people are doing. It takes a certain amount of finesse and
¡°chutzpah¡± to be a contrarian investor but it can help you make money,
and it can keep you from losing money.
Contrarian investing means that you need to buy when other people
are selling and sell when other people are buying. For example, during
the tech boom in 2000, the person who made money was the person
who sold their tech stocks when everyone else was feverishly buying.
Likewise, the person who bought Asian stocks during the Asian flu is
seeing -- and will see -- an appreciation in that investment because
they've bought what other people are selling.
People buy and sell every day, so how do you know what to buy and
what to sell? The answer to this question is to go and look at the cover
of investing and stock market magazines at your local magazine store.
On the cover, you will see the popular industries that people are
snapping up like crazy or dumping as quickly as possible. If you own
the popular ones, get out. If you don't own the unpopular ones, get in.
The popular ones may go up some more, but it will go down because
that's what stocks do: they go up and they go down.
By selling when others are buying you are taking profits easily. By
buying when others are selling you are snapping up opportunities at a
discount. The concept seems crazy, but it works. Why? Because of
the herd mentality. Many investors are undereducated when it comes
to investing so they simply follow the crowd. Willingly, they buy and
buy stocks that go up in price and are shocked when it comes crashing
down because they followed the herd and didn't realize that stocks
fluctuate.
Is contrarian investing foolproof? No. And no investing philosophy is
foolproof. Contrarian investing is not meant to replace quality research
and carefully considered transactions. What contrarian investing is
meant to do is to help you take profits when they're available and buy
cheap stocks when they're available. It's true that some stocks
plummet for a reason but if you combine contrarian investing with
some research, you'll be able to buy stocks when they are unpopular
and ride them back to the top!
About the Author
Jeff Lakie is the founder of Investing Information a website providing information on Investing
Article Source: http://www.simplysearch4it.com/article/11826.html
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