Few truths are self-evident, but here’s one as close as they get: In investing, the crowd is wrong much more often than right.
Most folks accept this. They remember pain from some of their own mistakes. More so, they recall market-bloodied friends, relatives, neighbors and co-workers. They’ve seen all the famous market gurus get egg on their faces. Academic studies show the wisdom of the investing crowd is folly.
Yet folks follow along anyway. For most, it’s impossible not to! The financial blogosphere, websites and cable TV talking heads pound market groupthink into our brains 24/7. Without conditioning yourself to resist, it’s all too easy to accept repeated falsehoods as fact, melt into the crowd and buy high, sell low—with the rest.
There is another way! Train your brain to battle the media, the crowd, your friends, neighbors and cocktail bankers and think differently. It doesn’t take vast market knowledge, a finance degree, an economics PhD or endless rigorous study. Armed with a few basic principles, internal alarm bells and an instinct for independent thought, you can be a true crowd-beating contrarian investor.
Yogi Berra once quipped, “Baseball is 90% mental, the other half is physical.” Might apply to investing! Mental discipline is key to success. See this book as your brain-training guide. You’ll learn tricks you need to protect your brain from media hyperbole and some principles to outsmart the crowd.
What does being a contrarian ...