A familiar saying among investment circles is that “everyone is a genius in a bull market”. Even though a bull market is reflective of significant optimism about stocks, in the stock market for every up, there is usually a down and it is fascinating to look at investor behaviour whenever markets go to extremes in […]
A familiar saying among investment circles is that “everyone is a genius in a bull market”. Even though a bull market is reflective of significant optimism about stocks, in the stock market for every up, there is usually a down and it is fascinating to look at investor behaviour whenever markets go to extremes in one direction or another. For that reason, contrarian investing interesting in that it is an approach that relies on the idea that more money can be made selling to the crowd instead of trying to chase it. In the second part of our Vancouver Resource Investment Conference interview with Ben Stadelmann and Benj Gallander of ContraTheHeard.com, we got their perspective on how beginner investors can think about getting started in the markets and how they can navigate investor conferences (to read part 1 of our interview click here).
Both Ben and Benj have been investing for quite some time and as a result they’ve learned what approaches suit them best. In their case, value investing is the approach they are most comfortable with and in particular contrarian investing is what they enjoy and are good at. As Ben Stadelmann pointed out, “there are lots of ways to make money in the market”. Each investor needs to figure out where their own comfort zone is and what type of investing is right for them. The key, therefore, is to be willing to experiment, to make some mistakes and most importantly to learn from those mistakes.
With so many options to choose from, exploring all of them can not only seem overwhelming, it could also get very expensive. According to Benj Gallander, the best approach is to take it slow, especially when you’re stepping into the markets for the first time. Since the odds favor beginner investors making more mistakes at the outset, if you “go in whole hog, you’re much more likely to get hurt”.
These days, taking it slow may be a challenge especially for beginner investors or those stepping into the stock markets for the first time. Technology has drastically changed how individual investors can find out about market information but also how fast they can act on it. Mobile trading, for example, now allows investors and traders alike to place trades from virtually anywhere their smartphone gets reception. The hazard, according to Benj, is that with all of this instant access, investors might forgo patience and instead expect that stocks go up in price quickly or they might be inclined to risk
too much too soon.
The stock market, and more broadly the capital markets as a whole, is part of an industry designed around the transfer of capital from those who have it to those who want it (or who want more of it). Investor conferences and the companies that attend them are all inclined to show the best parts of their story in the hope that investors will direct capital their way. As a self-directed investor, you will be facing industry professionals who are trained and seasoned at giving you the highly polished version of every story and so according to Ben and Benj, keeping your guard up is a must.
If you are a value investor then getting to know the company is simply a part of the process of making your investment decisions. Going to an annual general meeting, for example, is a useful way of getting to meet and know management and company executives. Building these relationships, while important, are not without their risks. In particular, while having management a phone call away or meeting them in person might “feel good”, according to Ben, it doesn’t mean that your investment and your money is any safer. Be cautious not to confuse the ‘good feelings’ with good company prospects. Another great tip offered by Benj Gallander is that being cynical and challenging what companies or analysts tell you will help to ensure that you don’t get the proverbial wool pulled over your eyes. As Benj put it, “people may be telling you the truth as they believe it [but] that still doesn’t mean that it’s right”.
As scores of investors poured through the doors at the Vancouver Resource Investment Conference it was clear that the appetite for learning about investment in the precious metals area was still pretty healthy. With so many voices in support of the sector, however, contrarian investors certainly find cause for concern. Of course, it might be fair to say that contrarian investors are always typically concerned about something – they are a tough crowd to please by definition.
Balancing being skeptical with actually taking a chance on an investment is part of the art of investing. Realizing that you are a part of the market means there are many lessons investors continuously have to learn about everyone else, but also about themselves in order to truly succeed.