How not to invest – Beware when chasing that pot of gold

How not to invest – Beware when chasing that pot of gold


Lately I have had quite a few people talk to me about ‘getting in on the property market’. In my view this is nearly always a dangerous investment thought process for three reasons.

1. It can be misleading to make investment decisions based purely on looking at a market as a whole as a opposed to analysing each individual investment for what it is.  For example, I see this as the equivalent of buying a fridge purely on the information that a retailer is having a sale, not taking into account that fridges may not be included in that sale at all.

2. I believe you make your money when you buy. This means you should buy at a discount to an investments intrinsic value as opposed to guessing, hoping or predicting an investment will simply go up.  To be honest the former is more akin to gambling than investing.

3.  Your unique goals and personal position may not align with the the responsibilities, requirements, necessary investment timeline and potential outcomes of a specific asset class.  For example, if you are planning on getting married next year and know that it will cost you $30,000, you do not want to lock your only cash reserves into a volatile asset class that could potentially go down in value over the short-term or in the case of property not be accessible to you at all, unless you sold the property all together.

In short I always believe in doing your own individual research on all investments and ensuring that they meet your specific goals. The fear of missing out or buying-in because your neighbour, brother or friend is, I believe leads to a lot of financial mistakes and misfortunes.

 

Related Post: 5 ASX listed companies with competitive advantages

 

Enjoy the ride!

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DisclaimerPlease remember, I don’t make recommendations, give advice or manage others money – If that’s what you are after, sorry I or this website can’t help you (see the TOS). Readers should not rely on information contained in Shared Investor for Share market, equities, securities or any financial related decisions but should seek licenced professional advice.  Shared Investor does not give or purport to give investment advice or make any recommendations whatsoever in relation to any securities mentioned in Shared Investor.  What I do is purely share my story and my investments exactly how I manage them.  I do this as I believe there is great value and enjoyment in observing the experiences of others, especially when it comes to investing.  Enjoy the ride!

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