Close this search box.

Table of Contents



A contrarian is an investor who specifically goes against prevailing market trends by buying assets that are performing poorly and selling when they perform well. They believe that the overreaction of investors to economic indicators can result in clear mispricings in securities markets. The theory is often compared to buying low and selling high, but against general market trends.


The phonetics of the keyword “Contrarian” is /kɒnˈtreɪ.ri.ən/.

Key Takeaways

<ol><li>A Contrarian is an individual who, particularly in stock market investments, goes against prevailing market trends by buying stock when others are selling, or selling when others are buying, with the expectation that the trend will reverse.</li><li>Being a contrarian can lead to high rewards, but also carries high risk. It’s considered a risky strategy because it relies on accurately predicting market trends that go against popular opinion.</li><li>Despite the risk, contrarian investing can lead to outperforming the market, especially during a recession or economic downturn, as contrarians can seize opportunities that others fear or overlook.</li></ol>


The business/finance term “Contrarian” is important as it represents an investment style that goes against conventional wisdom and current market trends. Contrarian investors believe that certain market movements are overreacted to, creating stock mispricings. They seek to capitalize on the market overreactions by taking a position that is opposite to the prevailing sentiment. This strategy can lead to high returns if the market sentiment changes and corrects the mispricing. However, it carries inherent risks because market trends could continue longer than a contrarian investor can remain solvent. Thus, understanding the concept of a contrarian is crucial for investors and traders as it can significantly impact their investment decisions and outcomes.


A contrarian, in the field of finance, refers to an investment style that goes against prevailing market trends by buying assets that are performing poorly and then selling when they perform well. The purpose of contrarian investing is capitalizing on the emotional reactions of other investors. The contrarian investor believes the crowd overreacts to news events, which results in stock price movements that do not correspond with a company’s long-term fundamentals. Thus, they aim to profit by taking a position that disagrees with the overall sentiment of the market.Contrarian investors deploy this strategy with the belief that herd behavior amongst other investors can lead to mispriced securities, creating opportunities for profit. This mass behavior can be overreaction to news or general market pessimism or euphoria. By taking a contrary position, contrarians aim to buy low and sell high, and thereby reap the benefits. Essentially, a contrarian seeks opportunities among securities that are undervalued, under-appreciated, or overlooked by mainstream investors. This strategy, while potentially profitable, also comes with high risk due to its nature of going against the majority opinion.


1. Warren Buffet: Known as one of the greatest contrarian investors, he often buys stocks of businesses when everyone else is selling during economic turmoil, and sells them when everyone else is buying. His famous quote, “Be fearful when others are greedy and greedy when others are fearful,” encapsulates the contrarian investment strategy.2. David Dreman: Founder of Dreman Value Management, Dreman used a contrarian investment strategy by investing in stocks that others generally avoid – particularly those that have been performing poorly recently. He believes that the markets overreact and that this overreaction is an opportunity to buy stocks at discounted prices.3. Bill Ackman: Another well-known contrarian investor, Ackman, through his firm Pershing Square Capital Management, made a contrarian bet during the COVID-19 pandemic in March 2020. While many investors were selling out of fear, Ackman used credit protection on various credit default swaps to buy stocks, predicting that the market would eventually bounce back. This contrarian move reportedly netted his firm a $2.6 billion profit.

Frequently Asked Questions(FAQ)

What does the term contrarian mean in finance and business?

A contrarian is an investor or analyst who intentionally goes against current market trends. They buy when others are selling and sell when the majority is buying, based on their own analysis and reasoning.

What is the philosophy behind contrarian investing?

The philosophy behind contrarian investing is that markets often overreact to both good and bad news, thus creating opportunities to buy or sell investments at prices which do not accurately reflect their intrinsic value.

Are contrarian strategies always successful?

No, contrarian strategies can yield high returns but they are not guaranteed success. These strategies require thorough research, patience, and the willingness to accept significant risks.

How does a contrarian differ from a regular investor?

A regular investor generally follows trends. They buy investments that are doing well, and sell those that aren’t. Contrarians, on the other hand, aim to buy assets when they are undervalued due to negative market sentiment and sell them when they are overpriced due to positive market sentiment.

What are the risks involved in contrarian investing?

Contrarian investing involves significant risks because it often requires going against popular market sentiment, which can continue for a long time. This can result in losses if the market doesn’t change direction as expected.

Can anyone become a contrarian investor?

Technically yes, but it requires a deep understanding of market trends, a high tolerance for risk, and the patience to potentially wait a long time for investments to yield returns.

Could a contrarian strategy work in any market condition?

Contrarian strategies can potentially work in any market condition. However, their effectiveness may depend largely on the specific circumstances of the market, both bullish and bearish.

Can contrarian investing be combined with other investment strategies?

Yes, contrarian strategies can be used alongside other investment strategies. For example, contrarian principles might be incorporated into a diversified portfolio strategy for risk management purposes.

How do contrarians identify opportunities?

Contrarians identify opportunities by studying market trends, news, and financial data to look for investments that are undervalued or overpriced by the rest of the market. They often use fundamental analysis to dig into a company’s actual worth compared to its current market price.

Related Finance Terms

Sources for More Information

About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More