In his latest interview on the Stansberry Investor Hour, Rob Arnott explains why contrarian investing is inherently painful. Here’s an excerpt from the interview:
Arnott: If something is cheap relative to its fundamentals and you buy it and it goes against you you’re going to look and feel stupid, and because you’re never going to catch the exact turn you’re always going to go through a period of looking and feeling stupid.
Picking that bottom tick is nigh-on-impossible, so the only way to make sure you have maximum exposure when the turn happens is to be willing to amp up your exposure as it’s going against you, and be willing to look even more stupid for a period of time.
This is why contrarian investing is inherently painful. It goes against human nature, and it’s deeply uncomfortable. That’s why it works for the patient investor, emphasis on patient.
There are quarters, there are years, there are even cycles where contrarian investing doesn’t work particularly well but over long periods of time it’s relentless.
You can watch the entire interview here:
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