How to know when to buy
The trouble with contrarian investors is that there are just so many of them. If you were to stick 100 City fund managers in a room and ask if any of them were contrarians, 100 hands would shoot up. After all, no one wants to admit that they simply follow the crowd.
But, of course, this is nonsense – they can’t all be contrarians. So how do you decide which tips are genuinely worth following? It’s often a simple case of looking at where the crowd is going and standing well back. A good rule of thumb is that if something is described in a newspaper as a “brave bet for bold contrarians”, it means you’d be mad to buy now. Banking stocks have been tipped with these exact words on an almost weekly basis since the credit crunch began, yet anyone investing so far has simply lost more money.