In 2012, it seemed like everyone was raking the bottom of their jewelry drawer for gold scraps to make a quick buck. And investors were lining up to buy your gold. Investors followed the time-honored rule of watching others and then doing the opposite. If everyone’s selling, you should be buying. In the case of gold, it’s pretty simple. Gold’s at an all time high, but it’ll get higher still. It’ll have a season of price dips but smart investors are keeping an eye on the long game. They’ll hold on indefinitely or until it’s feasible to sell. You see, the one thing that consumers forgot to realize in this gold rush is that in the long game gold doesn’t lose value, ever.
Learning to invest successfully by watching others, then doing the opposite, is a sound investment strategy. Wealth Savant would call it being a contrarian. In a 2011 investment post, the blog outlined two ways you could gain insider information, one being the route of an analyst and the other taking on the role of an eavesdropper. Being a great analyst might set you apart from those who aren’t professionals but it does nothing to grant a truly competitive edge among your peer group. This means your profit earnings are comparable but far from competitive. Given strategies to get market tips are worn and offer ‘safe’ bets at best. Listening in to calls and conversations also just gets you the same stale info everyone else gets. Wealth Savant argues that both methods don’t do investors any favors when it comes to unlocking immense wealth.
The trick is to look for bubbles. As long as there have been markets, there have been bubbles. These are just temporary factors and before long the market always stabilizes again.
In the case of the gold bubble, investors realized a down trodden economy would drive people to sell their gold. While prices were high, they weren’t that high and gold is a sure bet whose value will rise over time. The same strategy was and continues to be used by rental property owners during the housing market crash. Buyers were quick to cash in when they noted a spike in sellers shedding homes at below market prices. With 2013 being the last year of the tax relief (where sellers don’t have to pay tax on the difference between the house value and sale amount), buyers can be found steadily on the prowl for additional investment opportunities.
In business, the trick is to move past listening to the crowd and beyond being a mere dime a dozen analyst. The key is to look for the next big tech bubble. Ask yourself where technology is headed. For example, five years ago you could have seen the rapid advances in mobile technology and thereby instantly spotted the next here-to-stay bubble. At the end of the day, business is an investment of resources…and the same rules apply as the investment of dollars.
Bubbles are a great place to act as a contrarian because it’s a matter of time before the tide shifts in the other direction. Bubbles or market trends are to be expected with the pendulum of any modern marketing. Rather than panic and react, it’s advisable to stay calm, observe, and look for action gaps. If everyone is headed in one direction, the natural gap is the opposite direction which is where pockets of opportunity can be found.
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