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The Wrong Investment Strategy detrimental to your goals?

Discussion in 'General Property Chat' started by MTR, 19th Mar, 2016.

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  1. MTR

    MTR Well-Known Member Premium Member

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    Some wise words in this article, what do you think???

    Article by (Erion Shehaj)



    Reasons why the wrong investment strategy is detrimental to your goals

    Adopting an investment strategy that isn’t aligned with your goals can be devastating to their attainment for two main reasons:

    1. Loss of focus
    The investment “population” can be divided into two broad categories. The wide majority belong to the “sporadic” group. Investors that belong to this group make sporadic investments here and there usually due to external impulses like low interest rates, investment trends, etc. The minority belong to the “deliberate plan” group.

    They set a goal followed by a deliberate plan and execute their plan despite those external impulses. To avoid any misunderstanding, the deliberate plan crowd is still conscious of market conditions, pivots and adapts to optimize results. But the main direction they’re headed remains the same. External impulses are viewed as either wind on your back (when positive) or obstacles to overcome (when negative).

    The investment results between these two categories are vastly different. Sporadic investors typically make good investments but in the large scheme of things, these investments don’t change an investor’s life by their very nature.

    The main cause for the difference in results is focus. Something magical happens with real estate when a coherent long term plan, the corresponding goals and diligent execution are brought together in focus. Like the often quoted anecdote about the power of sun rays focused on a single point by a magnifying glass, focus activates the power of long term real estate.

    2. Failure to count the true cost
    The thought process of an investor that decides to use an investment strategy because it provides any benefit has one major bias: It looks exclusively at the benefit without counting the true cost (negative consequences).

    Namely the main cost that the investor doesn’t consider is opportunity cost. In long term real estate, time is the most valuable resource. Surely, other resources like income and capital play an important role. But above a baseline level of income and capital, time is critical because it’s not a renewable resource. If you have the skills to put them to good use you can always find more capital and earn more income. However, neither of those can be used to buy back time.

    Therefore, when you decide to dabble in a different strategy because of a benefit you are expecting (i.e profit from a flip) be sure to count the cost. How much will those two years cost you in terms of your long term strategy results? A few hundred thousand dollars? Four years of additional work till retirement? How does that benefit look now in comparison to those costs?




    MTR:)
     
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  2. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Is the wrong investment strategy detrimental to your goals?

    Yes.

    Especially if you keep running east looking for that sunset.

     
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  3. MTR

    MTR Well-Known Member Premium Member

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    This resinates with me.


    opportunity cost
     
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  4. Leo2413

    Leo2413 Well-Known Member Premium Member

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    I think the majority of property investors, ie anyone who buys 3 or less ips in Australia, do not think too much of how strategy correlates to opportunities, outcomes, goals. Tbh, I don't think many could write 3 sentences about property investment strategies. I think there is an overwhelming lack of basic knowledge from the many investors out there. We need to keep in mind, I am not talking about PC members. Many of the members here are well and truely in a different category to most property investors out there imo.
     
  5. Plutus

    Plutus Well-Known Member

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    I wish ABS or someone would release a big data set on property owners in Australia, I'd love to have a crack at finding commonalities to see what it is that causes people to stop at 3. My wild guess is its a mix of starting too late, buying the wrong properties & serviceability, but it would be fascinating to view their data. Even just knowing median portfolio value would be really interesting.

    RE OP's question, i think those are probably 2 major reasons why people stop. Hard to remain focused in the early days when you see a lot of money going in & little coming out, but think about how many people or even just members on here wish they had a time machine & could go back and buy more before a growth cycle...
    Opportunity cost is also a big one, for most people money is a finite resource and everyone has to make their own decisions on what they are/aren't willing to sacrifice now for benefit later on plus how long they are willing to sacrifice for.
     
  6. Leo2413

    Leo2413 Well-Known Member Premium Member

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    I largely agree with this.

    And buying the wrong properties means lack of/poor strategy which means lack of a basic property investment education.

    But above all this, personally, I think its a lack of will/drive/ambition/hunger to want to build a huge portfolio and grow large wealth/cash flows.

    I think anyone who has massive drive/focus/ambition would figure out pretty quickly what they need to learn/do/and who to network with to keep building their investments.

    If you think about it, I would take a guess that the most 'financially successful' people on the forum have never/rarely suffered from lack of focus, drive, ambition and wanting to push the envelope.
     
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  7. Kate Moloney

    Kate Moloney Well-Known Member

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    Where there is opportunity there is also cost. Its wise to look at both sides of the coin before investing into anything.
     
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  8. sanj

    sanj Well-Known Member

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    I can see your general gist here but personally at least I must admit to not entirely fitting what you're saying.

    I've certainly made the wrong investment decisions in the past, some that in hindsight didn't fit in with my strategy or didn't take me closer to my goal, which arguably is more important. other times I've made mistakes by investing as per my strategy but choosing the wrong particular investment.

    there are plenty out there working with a particular strategy in mind and making decisions that fit in with it when in actual fact there may be better strategies out there to reach the individuals goal. it's often a case of you don't know what you don't know, I've certainly been guilty of that in the past.

    I've also been guilty of losing focus at times, ultimately we're all human and other matters can get in the way and distract you. sometimes justifiably and sometimes maybe not so. I've been guilty of both. the idea that someone with drive and ambition wouldn't be guilty of the above isn't something I cab agree with and imo can be a damaging sentiment for someone out there earlyish on their journey who is largely doing well but has had some setbacks.

    I also disagree with the idea that "anyone who has massive drive/focus/ambition would figure out pretty quickly what they need to learn/do". if someone cans figure out pretty quickly what they need to learn or do, imo they're not pushing themselves enough. if I'm truly ambitious, driven and reaching for the stars like you're advocating, how can i remotely predict what I'll need to know in 5/10/20 years?

    I've working on some ventures that I never even considered or knew existed, it would've been impossible to predict it.

    having such a rigid interpretation imo can be counterproductive if it means someone is inflexible in their approach or not adaptable.
     
  9. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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    The Growth mindset - Telling penguins to flap harder. Criticism and shortcomings of Dweck's work
    The Growth Mindset : Telling Penguins to Flap Harder ?

    How fast will Schumacher be on bicycle ?

    Well put @sanj
     
  10. Leo2413

    Leo2413 Well-Known Member Premium Member

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    @sanj I'm talking about the basics. I believe there are basics that are really important to know. That's all.
     
  11. sanj

    sanj Well-Known Member

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    fair enough, im not saying you're wrong,im just saying that i'd consider myself to be one of the driven/motivated people you referenced and am reasonably successful but ive been guilty of breaking many of things youve said at some stage in the past and might be guilty of some of those again in the future.

    just speaking about myself personally.
     
  12. barnes

    barnes Well-Known Member

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    That is one of the reasons why property investing is losing it's spark. It's becoming VERY expensive to make mistakes. 20 years ago if you have made a mistake you could loose 10 grand, but now it might be a few hundred grand.:( It's a lot easier to do smallish investing like trading (trading is investing for a shorter period of time though), where your mistake can be corrected with a click in a second and you are always in control of your losses.
     
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  13. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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    Couldn't agree more:
    There are no stop losses in property :) and leverage (maximization of deductible borrowings) is not always a virtue as it works both ways. USA, Ireland and Moranbah is what happens when margins in property are called.
     
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  14. bobbyj

    bobbyj Well-Known Member

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    Agreed. A decent level of ambition and hunger for success is a powerful motivator to do what others aren't willing to do.

    In regards to hard work:
    Some turn up their noses, some don't turn up at all, and others turn up their sleeves.

    I believe majority stop early because they simply don't dream big enough. Done.
     
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  15. bobbyj

    bobbyj Well-Known Member

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    I don't think what Leo said needs to be taken word for word, I understand the general gist of it.
    It's purely a mindset. A go-getter, never take no for an answer mindset.
    I took my career sideways in the past 1-2 years to figure out life but in that time I still kept that killer mindset to be the best in whatever I do, including fitness, health and social interactions.
    This does not simply apply to money and property acquisitions.

    It's a mindset on your whole life that separates us from the common investor with 1-2 IPs.
     
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  16. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Mate so have I. But I don't think you have been guilty of not learning the basics, at least I doubt you make a habit of that.

    Whenever I answer a post I always answer it with the best advice I feel I personally can offer as i'm sure you do too. Doesn't make me right, just my opinion.

    State cycles
    area fundamentals
    Due diligence
    Financing

    and more, These are not hard and are in almost every book. My opinion is that if someone really wants to have a good chance of doing well in this his game, they will at least learn some of those basics. It doesn't make sense not to. If I was starting out, this is what I would want someone to tell me. Does it mean my advice is the only 'right' advice there is? Of course not. It is just one person's opinion. And I appreciate that your perspective is that too.
     
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  17. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Exactly. But some, and I'm not saying @sanj is, but some expect a post to be all comprehensive and inclusive of every eventuality or perspective. That's impossible. Its just a snapshot of an opinion that is impossible to convey in its fullest, in a post.

    That's why wider reading/learning is so crucial imo.
     
  18. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Isn't it expensive to make mistakes with starting a business? Don't 80% go bankrupt in the first...is it 5 years?

    I'm not anti business at all either, but risks need to be put into perspective too, don't they? While I agree property is not everyone's game, I would also think that for example starting a business can be quite risky too with much to lose. Investing is risky full stop.
     
  19. sanj

    sanj Well-Known Member

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    guys I'm not saying Leo was wrong, im just saying for myself and some other highly successful people I know, we've all had periods of drifting and where we lost focus. I was just saying I didn't agree with the bit about successful people never losing focus etc, from my experience. ultimately I don't care if that opinion is agreed by anyone or not, I just don't want someone else who is reading the post and possibly going through a tough time where they have lost focus to see it and think "oh crap if i had the right mindset to succeed I would never have done this etc. maybe I don't have it in me or maybe I'm not cut out for this"

    statements, especially of a somewhat absolute nature, can have a greater effect on some than others. I was just providing a counterbalance to that by way of my own personal experiences.

    after a business of mine I was really passionate about and grew rapidly from when I was 19/20 imploded at 23/24 at the same time I had some major personal issues with family illness and a friend and business partner rorting me etc, I did completely lose focus for a while and took a while to get back. the idea of finding 6 figures to pay debt back while not owning a cent was daunting. that loss of focus didn't mean I didn't have it in me, just meant I could have dealt with it better. I've also not in any way disagreeD that knowing the basics is vital but the basics are exactly that, the basics. you could teach it to a 15 year old. it's the journey after the basics are learnt that is more relevant to the level of success

    Anyway I've said what I wanted with this topic, I agreeD with Leo's gist, just not what seemed to be the absolute nature of it. agree or disagree it doesn't bother me, if it gave just 1 person some perspective I'm happy with that
     
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  20. Leo2413

    Leo2413 Well-Known Member Premium Member

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    I reckon if posts were voice recorded and not typed, it would sometimes take on a whole different twist. Reading words is sometimes tricky. Over interpret, under interpret, misinterpret etc etc.. :)
     
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