Fear of missing out
Does following the crowd always count in Investment?
You might have heard; 'Buy low, Sell high'.
That's the holy grail of investors, but can anyone effectively time the market? The answer is no.
The NYSE, NASDAQ, S&P 500, Cryptocurrency, and other financial markets are down.
Does this seem to be a good time to buy low?
Market timing is a complex skill that doesn't guarantee immediate results.
Time in the market is better than timing the market.
Most people confuse both concepts but they are not the same.
If you intend to extend your chance of succeeding in this hypertensive market, I suggest you explore the field of Contrarianism.
A Contrarian refers to one who takes a contrary view or action, especially an investor who makes decisions that contradict prevailing wisdom, as in buying securities that are unpopular at the time.
Contrarianism is a skill developed through experience and it could be challenging to teach.
Here's an example of Contrarianism being implemented:
A few weeks ago, Crude oil futures and crude oil and energy-related stocks were topping the market indices.
Companies such as ExxonMobil, Chevron, Schlumberger, etc approached their 52 weeks high.
A newbie in investing world might see this as an opportunity to buy shares in these companies and believe these companies' share prices might 'go to the moon🚀 🌝'.
But this is where you would experience loss
My investment fund bought Suncor Energy (NYSE:SU) at its peak price of $41.
It seemed to be a good purchase then, but it was a dangerous mistake that the investment fund paid dearly
This is the price of Suncor Energy on 14th July,2022
This is the price history Month to Date
You can see that MTD (Month-to-date) leads to a -23.89% loss
This mistake occurred because I was influenced by the decision of the herd, and this led to the underperformance of my investment fund for some weeks
So how can being a Contrarian aid your investment career?
The key to investment success lies in doing the opposite. If you can recognize the errors that others are making, you stand a chance to profit enormously through contrarianism.
Understand that an extremely high market is created when avid buyers are in control, this pushes prices to highs that may never be seen again.
Market lows occur when panicked sellers are trending and they're willing to part assets at prices that lead to loss.
Ensure to always sell speculative excess and buy despair-driven value.
Large amounts of money aren't made when buying what everybody likes. They're made by buying what everyone underestimated.
Here's what happens if you believe in an efficient market theory or you believe in the crowd.
You'll buy at high prices and sell at lows.
You'll buy what's been doing well and sell what's been doing poorly.
You'll be a conformist, not a maverick.
You'll be a follower of the crowd, not a contrarian.
TLDR:
Don't base your investment only on price.
It can be painful when a trend is going against you.
What's clear to the majority might be wrong.
Aim to buy when the price of something is lower than it should be.