The contrarian approach to investing is best illustrated by
A. staying out of the market no matter what experts are saying.
B. always buying when others are selling.
C. investing in mutual funds, contradicting the idea that investing in individual stocks
is better.
D. investing predominantly in the bond market when others are investing in the stock
market.
correct
B is correct answer
The contrarian approach to investing is best illustrated by B. always buying when others are selling.
To understand why this is the case, let's break down the options and explain each one:
A. Staying out of the market no matter what experts are saying: This does not embody the contrarian approach because it suggests completely avoiding the market, regardless of expert opinions or market conditions. Contrarians typically go against popular sentiment but still actively participate in the market.
B. Always buying when others are selling: This option reflects the contrarian approach. Contrarians believe that when others are selling and the market sentiment is negative, opportunities to buy undervalued assets arise. By going against the crowd, contrarians aim to capitalize on the potential future appreciation of these assets.
C. Investing in mutual funds, contradicting the idea that investing in individual stocks is better: This option does not necessarily reflect the contrarian approach. It suggests investing in mutual funds, which are inherently diversified portfolios that can contain both individual stocks and other assets. While investing in mutual funds instead of individual stocks can diversify risk, it does not necessarily mean going against conventional wisdom or market sentiment.
D. Investing predominantly in the bond market when others are investing in the stock market: This option represents a different investment strategy, where an investor prefers bonds over stocks. However, without additional information, this option does not directly align with the contrarian approach because it does not specifically address taking action against prevailing market sentiment.
Therefore, the best illustration of the contrarian approach to investing is B. always buying when others are selling.