CONTRARIAN INVESTING Meaning and
Definition
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Contrarian investing refers to an investment strategy that involves going against the popular opinion or prevailing market trends. It is a style of investing where an individual or investor purposely takes positions that directly oppose the consensus view of the market. Contrarian investors often look for opportunities in assets or sectors that are currently out of favor or facing negative sentiment.
The underlying philosophy behind contrarian investing is the belief that the market can often be driven by emotions and overreactions, leading to mispriced assets. By going against the crowd, contrarian investors aim to take advantage of these mispricings and buy assets at a lower price or sell assets at a higher price than they are genuinely worth.
To successfully execute a contrarian investment strategy, thorough research and analysis are typically required. Contrarian investors may look for indicators such as extreme market sentiment, excessive optimism or pessimism, or significant shifts in market dynamics.
By investing counter to the market consensus, contrarians seek to generate profits by buying undervalued assets that are expected to see an eventual turnaround or by selling overvalued assets that are likely to decline in value. However, it's important to note that contrarian investing is not a guaranteed path to success, as going against the prevailing market sentiment can result in losses if the contrarian viewpoint proves to be incorrect.
Etymology of CONTRARIAN INVESTING
The term "contrarian" is derived from the Latin word "contrarius", meaning "opposite" or "in opposition". It first appeared in English in the late 18th century with the sense of being opposed to the prevailing opinion or going against the current trends.
The word "investing" comes from the Latin verb "investire", which means "to put on" or "to dress in". In the financial context, it refers to using money to purchase assets, such as stocks, bonds, or real estate, with the expectation of generating income or profit over time.
Therefore, the term "contrarian investing" combines the idea of going against the prevailing opinion or popular trends (contrarian) with the concept of allocating money in order to generate returns (investing). In the context of finance, contrarian investing refers to a strategy where investors deliberately go against the mainstream market sentiment and make decisions that go against the prevailing consensus.
