Itís not always easy to practice the methods of a contrarian. The dictionary describes a contrarian as a person who takes a contrary position or attitude; specifically an investor who buys investments when most others are selling and sells when others are buying. This type of thinking just seems to go against the security we all seek in making the RIGHT decisions. However that secure feeling we gain because everyone is doing the same thing, is often dangerous and very costly. In this lesson I will discuss why I believe being a card holding member of the school of contrarians can often pay off handsomely in life - and not only when it comes to our investments.
For example, wouldnít it have been nice if you sold your second home at the beach in the summer of 2005 when home prices were approaching their peak? Or wouldnít it have been even better if you got out of the stock market six months to a year before the dotcom bubble burst five years ago. Lots of people would have much heftier bank accounts today if these strategies could have been followed. However, as you know itís never easy to time any market, even if you know in your gut that itís time to play the contrarian card and do the opposite that everyone else seems to be doing.
Now I wish I can boast that I am a full fledged card carrying member of the contrarian mindset when it comes to all of my investments. Unfortunately I cannot. However I have learned at the ďSchool of Hard KnocksĒ that there is merit to becoming a believer of the contrarian methodology, especially regarding my PERSONAL investments. In retrospect, I must say that I find it quite interesting now, that somehow I used different strategies for my PERSONAL investment decisions than I did for my BUSINESS decisions over the years. As a businessperson I was often in the contrarian camp. We bought old established businesses and real estate properties at a discounted price when no one else wanted to purchase them. This process seemed quite natural for us since we had the right contacts in place to renovate buildings to meet our needs and had proven systems in place to reinvigorate 40 to 60 year old stale businesses into vibrant profitable entities. This was both fun and exciting. But somehow I didn't always practice these same fundamentals with our personal investments.
Like others, when I look back I believe I felt very knowledgeable and comfortable regarding business decisions in my area of expertise. Unfortunately I would take some of the extra money I earned from contrarian decisions and invest it using more of a herd mentality, buying stocks and bonds that brokers and other so called analysts made me feel warm and fuzzy about. Following the herd mentality ended me up in a first row seat at School of Hard Knocks. Thankfully I learned my lessons and left the school early enough to prevent much damage.
Other ways I have played the contrarian card through the years was with travel and time. I would always commute or travel when traffic was lightest and still practice this method today. And yes, I am one of those guys that will leave the stadium or arena a few minutes before the game ends and listen to the final out in baseball or the last 2 minutes of football or basketball from the radio in my car. I just couldnít stand the thought of being stuck in a herd of traffic, adding an hour or more to my ride home.
I also try to attend the Mass with the least number of participants to insure a seat or I'll take the 5:30pm reservation at a fine restaurant to beat crowds. I go shopping when roads and stores are less crowded and Iím patient enough to buy the best brands and products when they are on sale to get the highest quality products at the best prices available. There are lots of simple ways to play the contrarian card and benefit by avoiding the herd mentality.
Both in my business and personal life we always tried to save lots of money during strong economies rather than spend extra money earned on frivolous stuff that we didnít really need. Then in economic downturns when prices do drop, we had extra money when others didnít and were able to buy a whole lot more per dollar. In good times and bad we always promoted our business constantly. We didnít cut promotional spending when times were bad - instead we cranked promotional spending up a few notches during economic downturns, with the money we had saved and gained market share and some great employees, from our competitors who were forced to downsize.
In conclusion, I believe playing the contrarian card has served me well throughout the years. Now that I have discussed these methods in more detail than I ever have before, I plan on making it a point to get my full fledged membership card and find more creative ways to play the contrarian card. We all have to Learn Lifeís Lessons from our own experiences and I hope that sharing mine, will help you in some way.