Finance Articles

Investment Strategy: Contrarian Investing 101

Have you ever wondered why some people are able to invest in any financial instrument or property at a low price and why you have always missed the boat? This article explains the importance of understanding why contrarian investing works and how having such a mindset can help you make more money as part of a larger investment strategy.

1.Value Investing mindset

Before one can profess to be a contrarian investor, you must have an understanding of the underlying value of the thing you are buying and decide that it is undervalued and historically and the market will rebound within a good period. A good book to start reading on value investing in the stock market is ?The Intelligent Investor?, by Benjamin Graham who was Warren Buffets? Professor in Columbia University and helped shape his investment strategy. So because you know the usual market value of something, you can purchase it on the cheap when prices drop , not unlike shopping for discounts at a supermarket.

2.Look out for downturns

Another key indicator is to understand your market well and then pay a careful attention to downturns in the economy or freak incidents like September 11. Some investments do down in value due to macro economic factors that may have nothing to do with your particular investment. A contrarian investor would spend time looking for ominous signs in the papers which may lead to a downturn so as to purchase stocks, shares at a discount to the average price.

Downturns that can prove profitable include:

? Natural Disasters that have nothing to do with the underlying stock. ? Cross Border Disputes affecting a particular Company?s price which has nothing to do with its main operations. ? Wars and Hostilities that can affect the competitors of your current favourite stock.

3.Look out for excessive exuberance

Contrarian Investors know that downturns can also be profitable if you use Put options which pay you when the underlying stock declines in price? The best way to predict such a downturn would be to look for in the words of the former Chief of the Federal Reserve Allen Greenspan, ?excessive exuberance?. This means basically that while prices are still rising furiously, the number of buyers would start decreasing and a market correction might follow.

Some indicators of such excessive exuberance include:

? When you see financial analysts being very rosy on highly speculative stocks. ? When the stock market indexes start rising close to record highs. ? When you notice that trading volume diverges with the price, meaning that while prices are rising, the trading volume is dropping.

Contrarian investing is thus a mindset where the individual looks for trading opportunities which can yield profits. A contrarian investor thus looks out for economic, political and other factors which can cause a large market movement in the particular financial instrument that he is trading in and can make a large capital gain from his investment. This form of investing can be part of a larger investment strategy and one should consider contrarian investing as part of his online investing warchest today.

Copyright ? 2006 Joel Teo. All rights reserved.

Joel Teo writes on various financial topics relating to Ahwatukee Real Estate Investment. Signup for his free online Real Estate Investing newsletter today and gain access to the ?Six Day Real Estate Investment Profits Course? now at http://www.realestateinvestment101.info/Ahwatukee.html

Other Article Sites

findabook.com  moneycd.info  a-mortgage.info   about-lemon-laws.info  aboutstudentloans.info
all-about-publishing.info  auctions-articles.info  bestcollege-university.com  bestispconnection.com
biblefolder.com  blogger-website.com  books-used.info  brokers-guide.info  buywindows.info  cable-dsl.info
career-miner.com  carpel-tunnel.info  cashinaflash.info  cashloanreviews.info  casinobell.com  chat-house.info
clearmycredit.info  collegeloantips.info  crones.info  depression-articles.info   dirnic.net  dishguides.info
divers-below.com  expodog.info   financewizz.com  fire-insurance.info  getgood.info  handleit.net   it-idea.info
health-supplies.info  hosting-right.com  insidealert.com  insurance-facts.info  jobs-employment.info
justgood.info  lookgold.net   lowcost-travel.info  money-source.info  myhostzone.info  numisblog.com
peoplesearchfinder.info  pr-articles.info  realeas.com   refinancing-guides.info  spyware-remove.info
telelot.info  the-law.info   toppaid.info  travel-deals.info  travelcorrect.com  wedding-guide-site.com
your-blog.info  your-credit.info

Mortgage Insurance Protects Your Home
Mortgage insurance can be taken out for a premium each month which you can find cheaply if you look with specialist providers This is one of the best ways to protect your monthly mortgage repayment each month and so protect the roof over your head against repossession

What Our Investment Advisor Wont Say Off The Bat
Most advisors will tell you they can beat the market. They may even point to years in which they did.

6 REASONS for Investing in Florida Real Estate Investment Property NOW
I invite you to take the next few minutes to learn the truth about the real estate market, how it compares to other methods of building assets and why it is such a lucrative form of investing. Many potential investors will say, 'I need to get into the Florida Investment Property market', especially taking into account current stock market fluctuations and the HOT market for investment properties, but simply don't know the facts about Orlando property investing and how to use sale and leaseback method of property management.

How To Become a Mortgage Broker
The mortgage industry accounted for $1,815,949,279,000 in loan transactions in 2004. That's one trillion, eight hundred and fifteen billion, nine hundred and forty-nine million, two hundred and seventy nine thousand dollars.

Vuecentric Powers International Mortgage Operation.
MortgageDashboard™ is helping American investors buy real estate in Mexico.

Finance And Investment In Los Angeles, CA
The locus of downtown Los Angeles is the Financial District, situated near to the construction at Bunker Hill. The district is mostly comprised of corporate office skyscrapers, hotels, banks, law firms, and real estate organizations.

Factors to Consider Before Getting a Mortgage in Turkey
The Turkish residential mortgage market has grown significantly over the last few years mainly driven by falling interest rates. The ?New Mortgage? law that passed in March 2007 further strengthened the legal background for both primary and secondary market triggering a sudden increase in the mortgage product variety. While there were only a few mortgage products before the new mortgage law, currently there are more than 20 different mortgage products for consumers. However, the fast growth in the market has not been absorbed by the general public. Surveys show that more than 50% of the people don?t have sufficient understanding of the new mortgage system. Moreover, most people have the perception that the new mortgage system is a miraculo...

2007 Property Investment Prediction Series from Amberlamb
Independent real estate investment experts Amberlamb are releasing their 2007 Property Investment Prediction Series throughout December. The 25 part series focuses on Amberlamb's predictions for investment hotspots and market movements in 25 of the world's most exciting emerging and established nations; when complete, the series will represent one of the most comprehensive free and independent property investment overviews available.

Vacation Finance Acquires and Combines Second Home News Blogs
Four blogs are combined to create a single source for news on the second home lifestyle, condo hotel, fractional, timeshare, and second homes.

Home Loan Lenders - Finding the Best Home Mortgage Lender
The process of obtaining a mortgage or home loan can be very stressful and quite time consuming. Finding the best lender for your situation requires research and comparisons between lenders and loan packages.

New Buyers Bonus Mortgage Program Allows Home Buyers to Skip Their First 6 Mortgage Payments
Katz Mortgage Team, www.katzmortgageteam.com/about.html, of Amtrust Mortgage Corporation, is pleased to offer a revolutionary new loan program called "Buyers Bonus" Mortgage Program, allowing new homebuyers to delay making their mortgage payments for up to 6 months. This loan can be used to purchase new construction or previously occupied houses and can be combined with 100% financing on fixed or adjustable rate mortgages (ARMs).

Cheap Finance Is Possible, Secure Your Bad Credit Home Loans
There are many variables that may affect your credit score, past financial mistakes get easily recorded in your credit history and there is no easy way of getting over these difficulties. And a bad credit score and history can be really a drawback when shopping for a mortgage loan. So you find yourself in quite a predicament, you need a mortgage loan but your current financial situation has become an obstacle and you are starting to despair.

Turn That Fixed Rate Mortgage Into A Goldmine
When you purchased your home, you most likely got a fixed interest rate mortgage with a 15 or 30 year term. These are the most popular mortgages in the industry.

Using SBT Accounting Software
Are you a small business owner who has at one point in time thought ?I wish I had a program that could help me keep track of my finances?? SBT accounting software is a great way to understand your business?s finances. This program is perfect for small to large-sized businesses because it can handle all of your company?s accounting needs.