The Ultimate Investment

In the banking industry, I work with many very wealthy individuals and companies. Some are struggling, on the brink of failure, just a hairbreadth away from a bankruptcy which inevitably is going to come. It’s just a matter of time. Others have battened down the hatches, sure they’ll survive, but figure they’ll lose money or at best break even for the next few years at least. The final, smallest group is actively working towards taking advantages of opportunities in the current market that will provide significant income for them and their companies for the next 10 to 15 years.

What’s the difference between the three groups? The difference is in their approach to investing.

The first group, those who are destined to fail, are those who borrowed as much as they could, made a lot of money when times were good and lived high. They didn’t provide for a cushion during downturns in the market. The second group didn’t borrow excessively. They had set aside adequate funds to weather a sizeable storm and in that they were prudent. The final group is filled with contrarians. Not in attitude, because most of them are very nice and agreeable people. They are contrary in their investing. They tend to sell when everyone is buying, and tend to buy when everyone is selling.

Here’s what a contrarian investor is doing now. He’s holding cash from selling several of his real estate assets for big gains near the top of the market. He’s hoarded the cash, knowing that history has always shown that what goes up eventually comes down. Now, he’s waited until values have severely dropped. He is using his cash (and cash he’s pooled with other investors) to buy real estate. Then he’ll wait until the market starts gaining — and we all know it eventually will ““ and then he’ll sell when everyone starts buying again and demand is high. He figures to at least double his money in the next 3 to 5 years.

A contrary investor knows that he always makes money doing the exact opposite of what everyone else is doing.