Contrary Opinion and Media Coverage

Money is made by going contrary to the majority opinion. If 90% of investors are bullish, then you will make (conserve) your money by remaining in the G Fund. The G Fund is a basket of government securities that has low, if any, risk. Martin J. Pring in Investment Psychology Explained: Classic Strategies to Beat the Market writes that "forming a well-considered contrary opinion is similar to establishing an informal measure of market risk. When all participants agree on a specific out look, it means that they are all positioned to take advantage of it...In extreme cases, these newfound arguments combine with the allure of rapidly moving prices to entice more players onto the field." (page 135) And these new guys buy into the C Fund at the worst possible time when prices are at the greatest risk of a fall.

By the time a major newspaper covers the stock market rise or advance, then it is time to think about a possible downturn in the market. Pring says "(t)he interesting thing about such stories is that they invariably occur after a substantial price movement has taken place...To the contrarian, the appearance of such stories is not a signal to buy; rather, it is a sign that (it) is time to think about selling." (page 140).

You want to be the first guest at the party, not the last one to stumble in. You also do not want to be left holding the bag when the party is over.

The market functions in the same way. Always strive to be the first one in when the market is about to rise. Strive to be the first one out when the market is about to fall. That's how winning is done. That's how money is made. That's how wise investors invest.

Have a Good Day!

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