By guest contributor Gerald Tay
Warren Buffet once quoted, “Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway”. Investors who are able to understand the real meaning of this simple quote would stop any investing activities immediately and start to acquire real knowledge and wisdom to become a successful investor. Investment wisdom is not only about acquiring knowledge to make successful investment decisions, but is also about avoiding severe investment mistakes. Buffett’s quote is indirectly pointing fingers to the foolish investors who are ignorant about what they are doing.
Let me ask you the following questions: Do you have any history of losses from property investing? Does your property investment only yield ‘average’ returns for you? Have you studied the common investment mistakes investors regularly commit while investing?
If your answer is ‘no’ to any of these questions, this article will help you. Firstly, this list of the top 30 mistakes investors make are a warning to avoid these mistakes when investing your money into the property market. Secondly, if you have any history of losing money from property investment or making only average returns, reading this list will help you figure out the mistakes you have committed.
And now, the list…
- You start investing without an assessment of your investment and financial goals
- Approaching the property market with greed to become super rich overnight
- Considering property investment as a part time job or hobby or a place to try your luck
- Start investing without acquiring proper knowledge and education on investment, the property market, risk and returns
- Making investment decisions with a lack of knowledge on what, where, when, how much to invest
- Don’t really understand the distinction between questions and answers
- Asking questions and always trying to seek the ‘right’ answer
- Your investment system is ‘Hope’
- Invest with your Eyes, rather than with your Mind
- Invest on Sexy, rather than Value
- Invest on Market Value, rather than Investment Value
- Invest with the ‘Norm’, rather than ‘Against the Norm’
- Invest on Net worth, rather than Cash flow
- Invest on Opinions, rather than Facts
- Invest on Capital Gains, rather than Cash flow
- Invest on Salesmanship, rather than Partnership
- Invest in properties with Minimal, Negative or Zero Cash flow
- Invest on the mantra of ‘Buy, Hold and wait for it to go up in value’
- Follow the investment activities of the public, fellow investors, colleagues and big investors without a clue of one’s investment goals and financial objectives
- Make investment decisions on market rumours, analyst reports and so called ‘expert’ opinions
- Invest without proper study on how global economics affects the rise and fall of asset prices, market volatility and risk-returns
- Not having the qualities of patience and prudence, and always panicking on a property downturn or crash
- Invest because you want some property in your investment portfolio
- Diversify your property portfolio from residential, commercial to industrial and end up with little or zero competence in any sector
- Your key advisors are friends who are broke, family members, property agents and ignorant financial planners, i.e. ‘The Blind leading the Blind’
- Investing in a property sector (Residential, Commercial, Industrial) that is unfamiliar and unknown to you, simply because others are doing it or because you think can make money too
- Invest on ‘kiasu’ mentality, i.e. if you don’t buy, prices will go up further and you will lose out to others.
- Buy when prices have gone up a lot, and sell when they fall
- Your only source of property investment advice comes from property seminars, courses and exhibitions.
- Invest by looking at a ‘Rear View Mirror’, instead of looking at what’s in front
These set of 30 common mistakes are compiled from my own personal property investment experience over the years, being ‘on the ground’ talking to many ordinary investors on their investment mind-sets, as well as being very fortunate to have my late multi-millionaire grandfather as my wealth mentor.
Return Of My Money, Not Return On My Money
Amateur investors have taken to the notion of sizing up an investment based solely on the returns it can potentially give back (Return On My Money).
Real wealthy successful investors ask this instead, “When can I take back my initial investment money (Return Of My Money)?”
Do remember as an ordinary investor, unlike the big boys, you have a small cash flow, perhaps only from your working income and nothing else. You also have only limited cash to grow your wealth and therefore minimising all possible downsides and risks in your investments is of utmost importance to you. The intent here is to learn to keep and protect your money first. Growing your wealth comes secondary.
As my late multi-millionaire grandfather said this explicitly, “If you want to grow your wealth, first learn how to keep your money.”
Analyse, Admit, Learn and Grow
Successful people always admit their wrongs, review, learn and move on. Analyse, admit and learn from these 30 mistakes you may have been committing or have committed unknowingly. These lessons will propel you in your property or other investment journeys ahead and help you achieve your financial objectives.
By guest contributor Gerald Tay, CEO and Chief Trainer at CREi Academy Group, and creator of ‘The 18 Irrefutable Laws of Property Investments’.