Do you see yourself as the next George Soros, Jim Rogers, or some other well-known hedge fund manager? If so, then hopefully you know that you have to think differently from the crowd. If you are loading up on gold and patting yourself on the back about how smart you are, hold the high fives - you are probably headed for the proverbial crash.
An interesting post is presented along these lines by Kevin at Invest It Wisely where he looks at unconventional investment moves for 2011. Here he considers some areas that have not done well and at the moment are a bit unloved by the investment community. But these are exactly the types of situations that produce the outsized returns when they come into favor. To appreciate this, reconsider the mood of the country when BusinessWeek published its infamous "Death of Equities" cover in 1979. With a stock certificate folded into a crashed paper airplane and crumpled up stock certificates on the table, it captured the negative mood in the equity markets. Guess what? That was the time to sell the house, cars, kids - whatever - and put it all in the stock market!
Kevin's ideas are worth pondering.
Contrarian thinking - not easy but if you get it right, it goes a long way.
If you have the stomach to buy what everyone hates and can wait 3 - 5 years, your odds of outperforming the market are pretty good. So does that mean I should load up on banks and debt issued by the PIIGS?
ReplyDeleteGreat points about having the right personality and patience. I wouldn't load up on anything (I guess I'll don't have to worry about being Soros) but dabbling in PIIGS debt and banks could pay off.
ReplyDeleteYes, this strategy doesn't agree with my temperament either. It's unfortunate when you think of the substantial successes some of the famed contrarian investors have had though. As I think of some of my favorite investor heroes, they made outstanding plays that ran against the status quo.
ReplyDeleteInteresting thoughts. I suppose with all of the doom and gloom in the late 70s, stocks were far from everyone's minds. If someone made the mistake of putting large sums into gold when it was near its peak, they would have gotten burnt.
ReplyDeleteThanks for mentioning the article! :)