Make a great deal of money on contrarian view!

Most investors are optimistic about the future. The hopeful investors get nothing more than fun. 

 

Investors can watch out for the following situations to make good  investment opportunity-

 

1. When the sentiment is bearish the market offers splendid opportunities to buy securities at ‘low price’.

 

2.  When the business expectation is poor, the market gives a golden opportunity to buy securities at a reasonable price. 

 

3. When most analysts express lack of faith in the company, the stock will be in beaten down mode and investors can exploit this opportunity to take advantage of the situation. 

 

If you’re a contrarian you can make a great deal of money. Take for  example, Zomato the stock was sold off and was trading as though there is no tomorrow. It found a panic bottom at ₹40+ and then shot up like a rocket to trade at ₹72.   Most analysts were bearish about the stock and the price had gone down from ₹170+ to 40. The business outlook was bad and one could have exploited the opportunity to make decent money in the stock. One of the easiest ways to make money in the market is to buy what the majority thinks it’s the end of the world for the stock. It is in this policy that both safety and profits exist. Unfortunately investors are willing to bet their money only when the stock is in extremely bullish mode.

 

Accept losses

One of the greatest trader Ed Seykota often says  “If you can't take a small loss, sooner or later you will take the mother of all losses.”

 

Investors should emotionally be detached to their own. investments. The key to success is to cut the  losses and let profits run. Unfortunately investors do just the opposite. They like to take early profits and don’t like to take losses and they also hate to repurchase something at a price higher than they sold it at. 

 

You should accept loss at the early stage to ensure safety of capital. Our own biases can be detrimental to protect the safety of capital.  The easiest way to success is to  accept the  losses at the early stage. 

 

If you practice these simple rules you can easily make good money. Let’s discuss more on it with examples in the coming days.