Peter Sainsbury – Use a Journal to Stay Self-aware When Making a Contrarian Investment

Peter Sainsbury is an investor in resource stocks and is also a commodity futures trader. In an attempt to help others, he wrote two books aimed at investors - Commodities: 50 Things You Really Need To Know and Crude Forecasts: Predictions, Pundits & Profits In The Commodity Casino. At Materials Risk, he writes about what he observes in the world of markets, economics, and investing.   “I thought I was clever, but in many ways, I was making it much more complicated than it than it needed to be.” Peter Sainsbury   Worst investment ever Making a contrarian investment is exciting Peter always had an interest in gold and after his previous success, in early 2014, he bought shares in a mining company. He was very excited to have potentially found something that was being underappreciated by the broader market. During that time, he thought it would be interesting to make a contrarian investment. He took a position that went against the trend of the market, hopeful of gaining a comfortable leveraged exposure to gold and providing limited downside as well. Going for the kill With that play in mind, Peter was searching around different ways to apply it. While reading through various articles, one company kept on coming up and was making a buzz in social media. After making enough research of this company – looking at how it performed in the past years and the different gold price environments in the past, Peter decided to make a contrarian investment. Getting out of a position is harder than getting in However, the excitement didn’t last long because one problem after another started to pile up. First of all, the gold price kept on falling. Second, the company was based in a country where a change in political regime meant that the attitude towards mining became increasingly negative. In effect, the share price of the company was down around about 70%. Even with all these issues, it still took Peter quite a while to realize that he just made his worst investment ever. He admitted that getting out of a bad position and moving on was really hard. Lesson learned Do not put all your eggs in one basket Investing without diversification is like throwing money away....