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What is contrarian investing?

As stock markets continued to fall there is a feeling that value is starting to appear in many sectors but whether now is the time to buy is debatable. This brings into play a very interesting investment strategy commonly known as "contrarian investing" which involves investing funds into companies and sectors which are currently "out-of-favour". So how does this investment strategy work?

As with any market in the world even stock markets succumbed to fashions and trends which can be very short lived or last for some length of time. The idea behind contrarian investing is to choose companies which still have a solid financial background, operate in markets which have long-term potential and may have fallen out of favour in the short term. The main risk to such a strategy is that a company could be financially weak and possibly be unable to trade through the "out-of-favour" period.

There are many different investment strategies some of which include chasing the latest hot stocks and hot sectors and others which are more long-term with the aim of taking advantage of short-term downward price movements to pick up long-term viable stocks. As with any investment in the stock market or any other investment market it is essential that professional advice is taken and you aware of the risks associated with such an investment.

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