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Contrarian Investing is Hard

MJG
edited April 2016 in Fund Discussions
Hi Guys,

“Investing is full of ironies. Here's a big one: With few exceptions, everyone thinks they're a contrarian.”

This was the opening statement from a Morgan Housel article that appeared about 2 days ago. If Ted referenced the Link (most likely), I apologize for repeating it here:

http://www.fool.com/investing/general/2016/04/20/when-everyone-wants-to-be-different.aspx

Being a contrarian investor is hard. It’s a tortuous road that is hard from both a study and decision perspective. It is never easy to challenge the wisdom of the crowd. It demands a committed work ethic, and discipline to stay the course. As Joe Granville remarked: “If it’s obvious, it’s obviously wrong.”

Being somewhat lazy, I like to simplify as much as possible. I am a great fan of the many 10 rule sets that purportedly guide us to investment success. The 10 Commandment size is the standard for the conventional investor. But it is not so for the Contrarian outlier.

One of the more famous investors who claim the Contrarian mantle is David Dreman. You likely remember him as the author of the popular “Contrarian Investment Strategies” 1998 book. It is an excellent read.

Dreman also assembled a compilation of his rules for a successful contrarian investor. Contrarian investing must be more difficult for an investor since his rule set contains 41 elements instead of the conventional 10 rule array. Here is a Link to the Dreman rules:

http://mebfaber.com/2011/08/04/dremans-contrarian-investment-rules/

These rules summarize much investment wisdom. Although I do not consider myself a contrarain investor (the crowd is statistically more often right), I do use many of Dreman’s insights. How about you guys?

Warren Buffett is an outstanding example of a highly successful contrarian investor. He famously said: "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well." That’s contrarian investing 101.

He also said: “By periodically investing in an index fund, the know-nothing investor can actually outperform most investment professionals.” Since I am now predominately an Index investor I suppose I qualify in the “know-nothing” class of investors. I seek and am satisfied with market returns.

Please enjoy and learn from the Dreman rule set. I did.

Best Regards.

Comments

  • BenWPBenWP
    I think some were musing about this topic the other day with respect to the Hodges Pure Contrarian Fund. It sure is hard!

    And The Best Small-Cap Fund YTD Is ?: What A Dfference A Year Makes: 2015 Down -(36.93)%
  • catch22catch22
    edited April 2016
    Rule 42: Know thy self.
    With this, a number of the other rules may be dismissed. Or invest in VWINX.
    End of message.
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