How to be a contrarian investor

'Be contrarian' is one of the most widely quoted pieces of investment advice out there. But what does 'contrarian' really mean, and how do you know if a contrarian investment will pay off? Phil Oakley explains five ways to spot a contrarian bet, and why contrarian investing works.

"Be contrarian" is one of the most widely quoted pieces of investment advice out there. It's also incredibly unhelpful. Most of us know that we should "go against the crowd" to achieve superior investment returns. All the great investors say so. Warren Buffett tells us to "be fearful when others are greedy and greedy when others are fearful" and John Templeton advises us to "buy at the point of maximum pessimism". You'll never hear a fund manager plug his fund by saying: "I stick as close to the herd as possible that's how you make the big bucks."

But how do you know if a contrarian investment will pay off? And how do you know what the market is thinking in the first place are you really being contrarian, or have you simply misjudged the market's mood? Here are some tools you can use to develop your own contrarian strategies.

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Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for MoneyWeek in 2010.