Go Against the Crowd – It’s the Only Way to Build Wealth

September 4, 2006 –

contrarian.gifIf you ask thirty of your friends that invest in the stock market what their average returns have been for the last decade, chances are that their returns are all within a same range of returns give or take 5%. However perhaps one will stand out of the crowd, averaging 15%, 20% or even 25% annual returns. And chances are that this one person that has drastically outperformed everyone else is doing something drastically different than all the others.

This simple exercise alone should tell you something. Find out what every other investor is doing out there and do the opposite or do something different. Don’t just do the same thing that they are doing, because it will lead you on the road to nowhere. Just as I stated in a previous blog (link) that most people are so lazy that they want someone else to even tell them what to think, most investors are the same way. They’re unwilling to put in the time to learn how to make steady, phenomenal returns, so they let someone else do their thinking for them — mostly large global investment firms. But think about this. If the large global investment firms were doing the best thing for these clients, then most of these clients would state that their portfolios return phenomenal returns every year. The fact that they don’t indicates that most likely you should be doing something very different from how the major investment firms manage your stock potfolio.

To me, contrarian investing isn’t just about buying stocks when people are selling and selling stocks that people are buying. To me, this isn’t contrarian investing at all. To me, contrarian investing is about identifying opportunities that 99% of other investors haven’t. By definition to build substantial wealth from investments you have to get in at the bottom of the market and sell at its height. That means you have to identify opportunities before anyone else does, and buy assets that make people say “you bought what?” because they never considered buying them.

In an upcoming entry, I will discuss fast food and the fact that most people are not even aware of what’s in the food that they are eating. If you’re wondering what makes McDonalds fries taste so good, it’s the beef flavoring they use. Out of deference to outraged Indian Hindus that believed that potatoes were actually a vegetarian product and to whom cows are a sacred animal, McDonalds has stopped using beef flavoring in their French fries in the Indian market. By digging down the rabbit hole of the food industry you discover interesting things about the foods you consume. And digging down the rabbit hole of investing is the ONLY way to build wealth.


Beef in my French fries? For real?

That’s why I prefer In-N-Out food over McDonalds. 100% potatoes there. When you speak of going against the flow I understand as well. Ueshiba Sensei was one of the greatest contrarian martial artists ever. In fact the reason he invented Aikido (which loosely translated means the way your spirit moves) was due to his dissatisfaction with all existing martial art forms at the time. Ueshiba sensei, also known as Osensei (Great Teacher) desired a martial art that could be a way of life (he was so far ahead of global marketing companies that didn’t come up with “lifestyle” marketing strategies until more than a century later). He desired a martial art that just wouldn’t produce superior warriors but also superior human beings. He desired a martial art that would embrace a philosophy that could be applied to every aspect of life, so he founded Aikido.

In fact, because the true philosophy today is lost in so many “martial arts” schools that solely and wrongly focus on the fighting aspect, very few true warriors exist today. In true martial arts, the only enemy one has is himself or herself. Learn to conquer one’s ego, and fear of anything and everything, even death, will disappear. In fact, many of the world’s greatest martial artists never compete because they have no need to appease their ego and to show the world that they indeed are the greatest. I have no doubt that somewhere in the Wudan temples, there is a gung fu practitioner that has trained and perfected the iron palm technique for the past twenty years and could cripple some of the “best” MMA fighters, even the ones that compete in Pride, with a single blow. But you will never see them compete in a public competition.

Most MMA (mixed martial arts) fighters continue to believe that the triangle choke, the arm bar, irime nage, a blow to the xiphoid process and so on are the best ways to disable an opponent and with good reason. These techniques have been around for hundreds, and some, even thousands of years. But there will still come a time when another Ueshiba Sensei comes along and invents a whole new style of martial arts that will blow people’s minds. In investing, large investment firms have conditioned people to believe the same bogus investment principles for at least half a century. And for half a century, they have consistently produced mediocre returns. Yet no one challenges this principles as flawed or wrong. No one, that is except the contrarian investor. That is why this mindset is the only one that will build true wealth.

One thought on “Go Against the Crowd – It’s the Only Way to Build Wealth

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top