Interested in hearing how you guys develop a contrarian mindset/view on the stocks that you analyse? Having trouble with confidence in my analysis as market sentiment is going in the opposite direction. How to deal with “am I just plain wrong or is the market just being insane and unreasonable?” If you still have high conviction vs market in your view, how do you take advantage of that “misspricing”?
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Harsh truth: You probably will never get over this hurdle and neither will most people.
Your differing opinions are either wrong or right. You can rarely tell which one it is, and since your are so young, it is usually wrong. Therefore, your expected return is probably greater if you never bet on your contrarian opinions.
You could spend your whole life testing it out and keeping track, and eventually you will gain a sense for when it is more likely right and allocate your wager accordingly. But this takes a long time and mean there is a long period of not outperforming, which is not acceptable if you are a trader and not sustainable if it is your main source of income. It's a fun game that may or may not pay off.
Best thing to do is put 90% of your cash into a diversified, passive portfolio (ideally with leverage, whether that is PE, RE, or leveraged ETF's), and use the 10% remaining to experiment and make bets when you are actually confident your differing take is correct, which will be sporadic.
The reason many investors are able to successfully be contrarian is because they have Aspergers (Buffet, Burry, etc) and don't feel any doubt when they are contrarian and it allows them to see the situation more objectively. We simply do not have that in our DNA and you are fighting an uphill battle if you go against the way you are born. Play to your strengths in life, not your weaknesses.
How often though are people arguably right in their view but the markets don’t seem to care / are happy to be irrational into perpetuity.
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