You’ll sometimes hear advisors or investors declare that they are contrarians. That means they believe it pays to go against the mood of the great mass of investors, as revealed to them by one or more of several indicators.

These include discussions with friends and acquaintances, the positive or negative tone of media coverage, high or low levels of mutual fund cash holdings, the average sentiment of investor newsletters and so on.

There is something to this approach to stock market investing, but it only works when the popular mood reaches extremes of unanimity. Most of the time, however, market opinion is divided and unstable. It never gets so bright, nor so bleak, that it can’t get more so.

For example, last week’s announcement of yet another cut in economic growth forecasts by the International Monetary Fund is enough to spur some investors to sell. At the same time, it might spur some contrarians to buy, if they felt pessimism over the situation had reached an extreme.

But suppose economic reports turn even more ominous, especially regarding China. In that case, you can bet that other, less easily rattled investors are bound to turn pessimistic and feel tempted to sell.

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Cutting your workload by narrowing your field of vision

Whenever there’s a crisis accompanied by intense media attention, it pays to keep in mind that the world economy doesn’t revolve around any one factor or area of trouble. Even two years of negative news about the European debt crisis didn’t produce the economic collapse many predicted. But that recognition goes counter to most contrarian thinking. After all, the point of the contrary approach is to make it simpler to form investment opinions.

In that sense, contrarianism is a lot like most investment rules and shortcuts. It cuts your workload by narrowing your field of vision. But by itself, it won’t improve your investment results. That’s because it’s just one of the many, many things that are worth looking at.

By all means enjoy the sharp and often caustic observations of contrarian investors. But keep in mind that this approach to investing is no guarantee of success. Instead, contrarianism is a lot like other specialized forms of investing: Sometimes it works and sometimes it doesn’t.

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