“The public is right during the trends, but wrong at both ends.”

“The public is right during the trends, but wrong at both ends.”

“Frequently, opinions on a given situation will be so one-sided that the contrary opinion is obvious. However, it may be some weeks, or months, before the trend of the situation alters sufficiently to make the contrary conclusion the correct one.”

A market’s momentum may continue to carry prices in same direction as most people expect for a period of time, creating doubt in the mind of the contrarian. It’s easy to tell when there is a lot of bullishness or bearishness, but picking the peak of that sentiment is almost impossible (unless you are very lucky), and being patient enough to benefit is emotionally difficult. To benefit from being contrary takes great patience. To be successful, an investor must be able to take a position at odds with the vastly held beliefs of the crowd, and sit with that position while the market goes in the wrong direction for an undetermined and painful amount of time.

In spite of these difficulties, there is value in contrary thinking. Asking what may be wrong with the consensus view can lead to profitable investment ideas. However, for all but the most experienced investors it’s best to have a disciplined approach to structuring your portfolio