Maximize your gains and protect yourself from losses by adopting this investing mindset!

Wednesday: The Independent Investor FROM THE DESK OF MILES EVERSON: Hello! We’re excited to share another investing insight in today’s “The Independent Investor!” Every Wednesday, we bring you articles about investing because we believe diving into the world of investments can help you attain wealth creation and achieve financial freedom. Today, we will talk about the connection between stocks and bonds, and why you need to pay attention to both if you want to become a better investor. Today, we will talk about an investment approach that will help you navigate the market regardless if it’s bullish or bearish. Continue reading to know why it pays to be a contrarian in investing. CEO, MBO Partners Chairman of the Advisory Board, The I Institute

Maximize your gains and protect yourself from losses by adopting this investing mindset! You can analyze a company to death, understand everything about it, and still lose money… if you don’t take into account how other players in the stock market think. This is why Howard Marks, co-founder and co-chairman of Oaktree Capital Management said that investors “should exploit the differences between how things are supposed to work and how they actually [work].” He said that because many tend to rely only on business fundamentals to determine how stocks should perform. While that is indeed a vital part of making well-informed investment decisions, there is another piece of the puzzle that should be taken into account: Investor sentiment. Contrarians like Marks know that true investment success comes from market dislocations—where fundamentals and prevailing investor sentiment diverge. Despite an unpredictable market, a savvy investor can still reap financial rewards while avoiding huge losses. So, today, we’ll explain how Marks’ investing framework can help investors identify and navigate market dislocations within the current economic environment. Investor Sentiment Often Dictates Key Market Moves Recognizing market patterns is key to understanding market dislocations. One pattern that repeats over and over involves investor sentiment as markets will often correct due to extreme investor sentiment in either direction (bullish or bearish). To identify impending market corrections, three things have to be done: Pinpoint the source of irrational investor behavior. Identify market movements based on sentiment. Find out the extent of the bearish or bullish sentiment and figure out the divergence between sentiment and reality. You need to keep your finger on the pulse of investor sentiment, resist the temptation to follow the “herd,” and keep your emotions in check. For example, when the market is bearish, you need to be bullish and vice versa. Circling back to Marks’ investment approach, contrarians are in a unique position because investors seem to be optimistic about multiple rate cuts for the first time since 2020. Adding to that euphoria is the fact investors are hoping that major stock indexes will continue to rally. These developments could lead the market to become overly bullish. When that happens, a negative correction could be looming on the horizon. So, even if the market seems like it’s on an upward trend, make sure to not get caught up in the euphoria surrounding it. More importantly, adopt Marks’ contrarian approach. You never know, a huge dip in the market just might be on the horizon. By going against the grain, you’ll protect yourself in the event of a market downturn without harming your ability to make money in the process. Hope you’ve found this week’s insights interesting and helpful.     Goldman Sachs (GS) was expecting an ugly quarter in 2023… Learn more about how you can find the hidden opportunity behind a bad quarter in next week’s article!