How being a contrarian investor is a mental stamina test!
Behold the power of the mind!
"It's hard to beat a person who never gives up!" Babe Ruth
For most people living on a limited budget, investing can seem like a chore. Having to set aside hard earned money each month for some far off end goal. It can also be a roller coaster ride of emotions - seeing your investments climb, fall or simply run sideways! And for those of us out there categorised as 'contrarians', being sat on a roller coaster would be akin to 'Driving Miss Daisy'!!.......
- Yes this seems more appropriate !!!
So what is a Contrarian?
By definition a contrarian is a person opposing or rejecting popular opinion or current practice. In the context of investing, this would refer to those currently buying gold, silver and mining stocks (a very simplistic view I know!).
I often wonder how I've continued to keep composure, despite my investments either falling or moving sideways in action. Is it naivety / false sense of hope? Maybe! But I would say its more down to the fundamentals. I simply look at things with a level head and take a view as to the likely direction an asset will move in based on key information to hand.
With respect to precious metals and the mining sector in general, be in no doubt - these will all become 'mainstream' investments again, but for us contrarians out there we are effectively loving the 'unloved'....before it's loved again! And this brings about great opportunities to build wealth by 'getting in' early.
Mental Test
...And this is where the mental test really comes into play! Buying when something is at its absolute rock bottom involves both skill and an element of luck at the same time. Most, like myself, will have bought in just before the bottom and so have seen our investments fall further. This is where doubt sets in!
Now I appreciate that this might sound really 'far out there' but I believe that we can shape our own reality by just the power of our mind! Whenever, I have a little niggle, I keep focusing on where I will be living in the future (it's a custom built house, built into the side of a hill, surrounded by green fields, near to the sea!).
You need to accept that you can't control exactly when it will happen but just know that if you've done your homework (research) it will come true. Getting obsessed with short term price action will nuke your mind. Forget it unless you're an expert trader. Buy and hold is my philosophy!
Accept that it's like a saucepan full of water. At first, only the odd bubble here and there, but the longer its kept on the flame the more it begins to bubble... until eventually it's boiling over!!!!
Stay positive (visualise winning!) and never, ever GIVE UP!
I buy the mental test side, good one.
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What metric do you use most often when comparing comparable miners?
Hi Al
I think that you're likely to be more qualified to answer this question than I!
The number one metric I've been using is no. of shares in existence simply because some of my picks are either pre production or are investment firms (hold stakes in other miners). I also look at the balance sheet to see the cash in bank (although BS are just a snap shot at a particular point in time). I also look at where they are operating.
I like picking some beat up firms if I think they've reached a bottom but appear to have potential. Arian Silver Corp is an example of this. However, I've noticed recently that they've started to issue more shares which touches upon a point that I made in a prior blog about share dilution.
So whilst I'm confident in my ability to identify sectors where the fundamentals are right for a turnaround (e.g precious metals, rare earths etc). Picking stocks is another kettle of fish altogether.
With that said though, even stocks that turn out to be weaker are often carried along with the momentum when the market picks up. Also, I tend to double e.g. 2 gold miners, 2 Lithium miners etc etc.
I appreciate that you're not a big fan of mining firms and do realise that my decisions are more risky. Does any of what I've said make sense? I feel like a politician giving a really bad answer!!!
Sorry, been a bit under the weather so have not been at my computer much. And I am far from being a pro - just wondering what you look at. I might dabble in some mining shares in the future - so like to arm myself along the way. As miners are price takers - I probably would put emphasis on lowest cost operators. For normal stock I like to look at HEPs over a 5 and 10 years in combination with a stocks PE BTW - if you ever looking at a dual listed (with one side being in SA!) - great site for stats - and free. http://itradedata.co.za/Data/014590/fin_analysis.htm
Thanks Al and sorry to hear that you've been ill! You're right about looking for low cost operations (less susceptible to falls in commodity prices)
I recall you mentioning an interest in lithium miners. I think this is definitely something to buy stocks in (same with cobalt which goes hand in hand with lithium). I think that these will eventually become the 'new oil' stocks.
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The one weakness I have is penny share stocks (I'm kind of like a fly to sh*t). There's plenty of upside if you get it right but also lots of risk! That's why as per a previous blog I was wondering about miners in other markets (Canada & Aus) - From what I've seen they tend to be better quality and don't use shareholders as a constant cash cow.
Great post my friend. I wish I knew what was the right thing to do when it comes to investing. Many I nights I wonder if what I should do when it comes to my money. I guess a person spends his life wondering these questions and never knows what is truely right or wrong. I guess time is the only judge!
Thanks DR!
I think everything is circular and what becomes hated eventually becomes loved again. I like to go with the 'be fearful when others are greedy, and greedy when others are fearful' mentality......so pounce on things when both the price (and fundamentals) right.
With regards to pondering what to do with your money, I recall an earlier blog that you posted re your portfolio ...based on that, I think you're doing everything right and so I wouldn't spend too long pondering!!!!
Thank you good sir. Yes my plan so far has been working out good. And being here on Steemit is just good business! So yes I think I am doing alright but one never knows what could be! Lol