In investing, it’s often good to go the opposite way of the crowd

Too often, we hear what someone else is doing with his money, and we do the same. Following the herd in investing isn’t always sensible. You might make more money by being contrary.

Consider the old saying, “Buy low, sell high.” This is the ideal scenario for many people, but it’s not the only possibility. You might also buy high and sell higher. After all, some high-quality companies rarely sell for what would be considered a low price. Of course, if you’re patient, you may find some great companies occasionally on sale.

Another twist would be “Buy low, sell … never (or at least not for a very long time).” Too often, investors sell out of a stock too soon. If your shares of Buzzy’s Broccoli Beer (ticker: BRRRP) are up 50 percent, it can be tempting to sell and take your gain. But consider holding on. As long as the company is still firing on all cylinders, 10 years from now, the shares might be up 200 percent or more. (You can also compromise with yourself, selling just some of your position and hanging on to the rest.)

Don’t be afraid of being contrary in other ways, as well. If many investors seem to be turning away from a company, it could be an ideal time to consider buying shares. Many great companies fall on temporarily tough times. Just be sure to research the company thoroughly and determine that its problems are not long-term.

Another thing that many investors do is find places for all their stock dollars. This can work out fine, but sometimes it’s best to keep a chunk of your money on the sidelines, waiting for a great opportunity. Super investor Warren Buffett, for example, talks about waiting for “fat pitches” to swing at. If you can’t find enough extremely promising stocks, why park your hard-earned dollars in companies that don’t inspire as much confidence?

You needn’t follow any herd or any dictum to succeed in investing. Take the time to learn and think for yourself.

Ask the Fool

Q: What’s a mock portfolio? — T.C., Peoria, Ill.

A: Mock portfolios are terrific for new investors and those who want to test investing methods. You simply go through the motions of investing, stopping short of actually plunking down your hard-earned cash. Research companies that interest you, decide which ones you’d buy, and then set up a pretend portfolio, either on paper or online. (Many Web sites let you set up online portfolios. Try http://quote.fool.com or http://finance.yahoo.com.) Record details such as when you “bought” the shares and at what price. Then track your performance and see how you do. (Aim to beat the market.)