Invest Like It’s 1986: Investment Planning for Contrarians Means Taking the Alternate Route
How much of what you do today is similar to what you did in the mid-1980s? Are you embracing the same fashion trends or hairstyle? Is your car from that era and are you watching Cheers and Knight Rider for entertainment? We might be holding on to only a fraction of what we held dear in the mid-80s, but there is one thing that hasn’t changed – a savvy approach to investment planning.
Go ahead and invest like it’s 1986. Why? Because the tried and true, classic investment principles from 1986 still apply. This is true of the contrarian approach to investment planning. The contrarian approach takes a different path than what is expected – it’s going against the grain and not following the crowd. Going against market trends to focus on shares and sectors is really what it’s all about, and it’s something that worked all the way back when Top Gun was the biggest hit of the summer.
At Lawson Kroeker, we published a newsletter in the 80s that discussed the contrarian approach. We quoted James Fraser, the founder and president of Fraser Management, who said a contrarian is one who “is early though he is not a forecaster and rather works toward thought-out conclusions. We have to think through a given problem before we gain a fresh and different approach to a solution.”
So, how does investment planning that focuses on the contrarian approach work? Contrarian investors take a long-term view for picking stocks. They will make choices that go against the crowd as they buy into under-appreciated assets and sectors because they believe following the crowd isn’t always a good idea.
For example, when the market is volatile, the crowd usually begins steering away from “risky” investments and heads toward calmer waters, like bonds. The contrarian response is – “hey, you’re missing out on some opportunities that could be highly valuable.” Think about all the people who jumped on the bandwagon during booms, only to feel the crushing defeat when the bust occurred.
Contrarian investing may not be for everyone, but the principles seem to stand the test of time and rise above come-and-go investing trends. When a professional advisor is helping you guide your course and remain focused on the long-term, this style of investing can bring its own unique level of confidence and success.
At Lawson Kroeker, we aren’t afraid to be “delightfully contrarian,” and we invite you to sit down at our table and find out what this approach could mean to you and your goals.