It's good to be skeptical about investor stories - the stuff that goes unsaid...

Discussion in 'Investor Stories & Showcase' started by jaybean, 20th Oct, 2017.

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  1. jaybean

    jaybean Well-Known Member

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    This is something that's always in the back of my mind when I read other investor stories. I guess this is written for novice investors just getting a start.

    By "skeptical", I don't mean the stories or the numbers were made up. Being the internet, this is likely to have been your first thought upon reading the title of my post. No, many people here post full breakdowns and upon close analysis, it all checks out. So no, this is not what I mean by being skeptical (that being said, I'm sure we have the occasional liar but that's not what I want to talk about).

    What I want to talk about is the real context behind these stories that go unsaid because people have forgotten, because it's private (and rightly so), because they're trying to make it all sound more glamorous than it was, or they fail or refuse to acknowledge the role of luck.

    It got me thinking when a friend of a friend was boasting about how he paid off his home in 3 months. What we found out later was mum and dad covered it. This is an extreme case so I don't want this example to be the focus of my post, but I'm sure many of us - myself included - are at times guilty of omitting information which makes us look much better than we actually are, or that our journey was easier than it really was.

    Just anecdotally, here are some examples I've noticed just in my immediate group of friends and family (these are NOT my stories!):

    1) How it happened: The first investment was an "accident" - just got married, going through the motions of buying a PPOR, utterly clueless about the property market or investing. How it's represented: I'm an investment genius, I knew this area was going to explode, it was obvious. Dead obvious.

    2) How it happened: Mum and dad gave me my first house, or I got a massive inheritance. How it's represented: Conveniently omitted from most conversations.

    3) How it happened: I have a really high paying job. How it's represented: Ability to finance huge amounts of debt is rarely spoken of, because talking publicly about salary is considered boasting and poor form (which is 100% correct, no one is obliged to disclose their salary, so not disclosing it is NOT lying, but it does considerably skew an investor story for a reader not to know this, which is the point I'm trying to make).

    4) How it happened: Dad was a very successful investor, was stepped through every single part of this from day 1. How it's represented: Self-taught, baby.

    5) How it happened: By the grace of god I didn't sign up for that scam or sold a stock at the exact right time because of blind luck, which would have been the straw that broke the camels back. How it's represented: Everything was calculated.

    Anyway as I said, when I say it's important to be "skeptical", it's not because I think someone is lying per se. If you don't tell people the reason you're able to service such a huge portfolio is because you have a high paying job, well that's private stuff and no one should criticise you for it. Sometimes it's not a privacy thing, it's a source of embarrassment - I'm a trust fund baby. Or mum and dad bought my first house. Sometimes it's purely luck, but it's difficult to acknowledge the role of this - I know I'm guilty of this a lot - being born in this country to non-abusive parents is like hitting the jackpot and I try not to forget this. Sometimes it's not easy admitting just how depressing things got for you because hey, it's not pleasant to talk about how you were on anti-depressants after you lost half your portfolio during the GFC, and you just want to focus on the glamour - to an outsider or novice investor, this makes it all appear like it was all too easy. There are so many reasons, but I guess my (long winded) point is, at the end of the day, even if the core story is true, the most critical part of it all is the context and if this is omitted or cherry picked, it can be incredibly misleading. My advice is to read with healthy skepticism. Be optimistic, but remember, in many cases for good as well as bad reasons, the whole story can never actually be told.
     
    Last edited: 20th Oct, 2017
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  2. ellejay

    ellejay Well-Known Member

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    I think it's a given that some investors have bigger pockets than others, whatever their means of getting there. You can usually read this between the lines or clues come out over time. So what though? I wouldn't get side tracked by this, concern yourself with your own path to success and help others wherever possible (that's my philosophy anyway).
     
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  3. jaybean

    jaybean Well-Known Member

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    I think you've missed my point. This isn't about jealousy, it's about the difficulty of learning from others - or learning the wrong lessons - if you don't have all the information...or if you assume you have all the information.

    I know one of the most difficult things for me has been dealing with the dark times, but this isn't something I often discuss. So my story to success has been largely psychological, yet anyone that I discuss investing with would never know this. What lessons did you learn by talking to me? Financing. Strategy. Sure. Psychology? Nope.

    It's like saying you cured your cancer by thinking positive, but failed to disclose you had chemo.

    And as I said, I don't think people do this for malicious reasons, not all the time anyway. There are many good as well as bad reasons why the whole story is never told.
     
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  4. Brendon

    Brendon Well-Known Member

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    Great post!
    I 100% agree with what you're saying, my girlfriend hates it when we're watching any property show or reading stories in magazines and I'm straight away a little skeptical by highlighting the details they don't include, this isn't to take away anything from anyone else but there's always more to the story.
     
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  5. ellejay

    ellejay Well-Known Member

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    I wasnt thinking about jealousy at all. This is an online forum. You can pick up bits and pieces of information but many want to stay anonymous or limit sharing of personal information. So although its great to hear the stories, would you base investment decisions soley on them without knowing more about your sources? I agree with you, you cant really. It makes more sense to reach out to posters who sound like they share a similar financial position, risk profile/mindset , strategy preference and then learn more. It's great to follow stories of investors in all walks of life doing all sorts of investing. We learn by doing though, and a safe way to learn is to be guided by someone who has been successful and has a similar profile to you.
     
    Last edited: 20th Oct, 2017
  6. Otie

    Otie Well-Known Member

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    I think what’s more annoying is when someone (ie a relative) who has had the same opportunities as you, and didn’t act, then always harps on about how lucky you are etc, when it has nothing to do with luck for some of us it’s bewn hard work, sacrifice and many sleepless nights and stressful periods of time!
     
  7. The Y-man

    The Y-man Moderator Staff Member

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    I must say I do often leave out details, simply to make the story more coherent and concise. I don't however shy away from sharing the bad stuff - as I believe it is as important to know what went wrong as much as what went right.

    The Y-man
     
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  8. skater

    skater Well-Known Member

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    Like Y-Man, I think I tell it, warts & all.....but you've also got to understand that most people don't want to listen to you rabbit on about this stuff for hours on end. Or, for that matter, read a novel on here. For that reason, things come out in bits & pieces. If someone has a thread about some issue, you might post up your experience with this, & then another time there's another thread, or conversation & you add your experiences. Over time, the whole story comes out, but it's not an all at once kind of thing.
     
  9. Trainee

    Trainee Well-Known Member

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    Even the most honest stories are told after the fact. So all the problems are looked at in hindsight. The simplest i bought and held for 30 years skips over high interest rates, tenants running off etc
     
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  10. jrc

    jrc Well-Known Member

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    Yes we gloss over things. For instance I bought a 4 unit block of flats in a regional city in 2001 for $85,000 grossing $300 per week. My only stroke of genius was I was willing to buy in an area locals were not and I knew that at the time. 10 yrars later sold for $320,000.

    But I had not expected capital gain. The property had sold for $85,000 a few years earlier.

    If I was an investment genius I would have bought 1 or 2 similar blocks in the next 6 months for similar money. Instead I dithered and thought of all the reasons why this could be a problem.

    At some stage during the investment journey you may actually know what you're doing but at least in the first few years if you're successful it may be more luck than knowledge.
     
  11. SatayKing

    SatayKing Well-Known Member

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    Yup, pure serendipity in my case. Probably the only positive thing in my favour is what one financial fella described as strong financial discipline. Other than that it just seemed to happen.
     
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  12. MTR

    MTR Well-Known Member

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    Yes, its not an even playing field, no point getting caught up in what advantage others may have, make the most of what you have.

    Unfair Advantages
     
  13. WattleIdo

    WattleIdo midas touch

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    Agree that context is very important but that you wouldn't want to know it all in one go.
    I think it's important that all posters, including business members, provide some context with each post. These are the ones I can learn from. It might also help some of the doomsayers gain traction; if we knew their mistakes and their motivations for all the dire warnings, they might not be ignored so much and then they wouldn't have to post so much blah blah. They just end up in theoretical arguments. On the other side, some people are so positive and bland that you never want to meet them.
     
  14. Humphrey

    Humphrey Well-Known Member

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    Suggest you read "Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets" by Nassim Nicholas Taleb.
     
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  15. DowntownBlock

    DowntownBlock Well-Known Member

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    It's a bit Meta, but also this:

    You could argue for every one successful person on PC there are x unsuccessful ones not posting, for example.

    Survivorship bias or survival bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility. This can lead to false conclusions in several different ways. It is a form of selection bias.

    Survivorship bias can lead to overly optimistic beliefs because failures are ignored, such as when companies that no longer exist are excluded from analyses of financial performance. It can also lead to the false belief that the successes in a group have some special property, rather than just coincidence (correlation proves causality). For example, if three of the five students with the best college grades went to the same high school, that can lead one to believe that the high school must offer an excellent education. This could be true, but the question cannot be answered without looking at the grades of all the other students from that high school, not just the ones who "survived" the top-five selection process.
     
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  16. Sackie

    Sackie Well-Known Member

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    Imo luck definitely plays a part but its not the defining factor which determines who will do well and who won't. Before luck can take its course you often have to put yourself on the firing line first.
     
    Last edited: 23rd Oct, 2017
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  17. DowntownBlock

    DowntownBlock Well-Known Member

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    IT's a cliche but I have found it to be true.

    The harder i work the luckier I get :)
     
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  18. Sackie

    Sackie Well-Known Member

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    Finally something we agree on mate;)
     
  19. WattleIdo

    WattleIdo midas touch

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    Definitely. We don't hear enough of what went wrong. Mostly they just don't post. Or only post positives. Also, heaps of posters have only a ppor so ...
    But then a lot of successful investors aren't here.
     
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  20. Tonibell

    Tonibell Well-Known Member

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    It is good to be skeptical about most things - particularly first person success stories.

    Just take what you can, within your own bounds of in credibility, and discard the rest.

    A bit like the “letters to the editor” section of the olden day magazines.
     
    Last edited: 23rd Oct, 2017