Q Magazine - - Q Wealth -

How to tell the dif­fer­ence be­tween a ‘good’ in­vest­ment and a ‘bad’ one: ‘Good’ and ‘bad’ are very sub­jec­tive terms. What one in­vestor may con­sider a ‘good’ in­vest­ment re­sult an­other more ex­pe­ri­enced in­vestor might con­sider to a ‘bad’ in­vest­ment re­sult. Most peo­ple un­der­stand that there are also some truly ‘hor­ri­ble’ in­vest­ment choices out there too. Equally, with in­vest­ing there is al­most al­ways some­thing that you could have done dif­fer­ently to take your in­vest­ment re­sults to a higher level.

If I had to de­fine what a ‘bad' in­vest­ment is, I would ar­gue that it is sim­ply an in­vest­ment that does not help you achieve your in­vest­ment goals within your de­sired time frames. Even if the prop­erty you bought has made you some money over time, has it pro­vided you with the ex­act re­turns you were tar­get­ing within the time­frames you had set? Had you in­vested in a dif­fer­ent prop­erty, or dif­fer­ent as­set class al­to­gether, could your re­sults have been bet­ter?

The prob­lem for many prop­erty in­vestors is that they have never taken the time to work out their in­vest­ment plans and time­frames in the first place. There­fore, they will find it in­cred­i­bly dif­fi­cult to de­ter­mine whether any, or all, of their in­vest­ments are good or bad.

Why do so few prop­erty in­vestors fol­low a clear in­vest­ment plan? I have found over the years that the main rea­sons in­vestors fail to cre­ate a clear roadmap for their prop­erty suc­cess is a com­bi­na­tion of some, or all, of the fol­low­ing four road blocks.

1. They don’t know how to cre­ate a clear in­vest­ment plan

Let's face it, most peo­ple have never been taught, nor had any real ex­pe­ri­ence, in learn­ing how to cre­ate a con­cise blue­print for how they are go­ing to achieve all the things that they want to achieve in life. It stands to rea­son that if you don't know how to do some­thing, chances are it sim­ply won't get done. By con­trast, imag­ine how much eas­ier the process would be if you had some­one who was an ex­pert in goal-set­ting hold­ing your hand and guid­ing you through the whole process step by step.

2. Plan­ning takes some time and work to get it right

Most of us have a big bas­ket called the too-hard bas­ket. There's also an­other big bas­ket called the do-it-later bas­ket. For many in­vestors, the thought of sit­ting down to cre­ate a plan, es­pe­cially if they don't know ex­actly how to do it, means that the task seems her­culean. There­fore, it gets thrown into one of those two bas­kets de­scribed above – where it's likely to stay for­ever.

3. They haven’t iden­ti­fied the real value in mak­ing a plan

In life, we all make choices that typ­i­cally line up with our high­est val­ues. The prob­lem with for­ward-plan­ning is that many peo­ple can­not see the im­me­di­ate link be­tween the plan­ning and how it helps achieve a higher qual­ity life in the fu­ture. It all seems too far away. How­ever, they can spend many hours plan­ning a 2-week over­seas hol­i­day. This is be­cause they im­me­di­ately un­der­stand how re­search­ing the best flights, ho­tels, res­tau­rants and things to see and do will im­pact on the qual­ity of such a hol­i­day. I ques­tion the logic in plan­ning so ex­ten­sively for some­thing like a hol­i­day yet fail­ing to recog­nise the value of set­ting your­self up fi­nan­cially for the rest of your life. You might like to start by writ­ing down all the ways your life could be im­proved if you had a clearly de­fined plan to fol­low.

4. Lack of trust

There is so much (mis)in­for­ma­tion out there, and con­flict­ing opin­ions, that it can be dif­fi­cult to know who, or what, to trust. With the Hayne Royal Com­mis­sion re­cently throw­ing a damn­ing spot­light on so many ex­am­ples of poor and con­flict­ing ad­vice within the fi­nan­cial in­dus­try, it might seem safer or eas­ier just to for­get the whole plan­ning idea.

How­ever, by be­com­ing more ed­u­cated you will be­come more em­pow­ered to be able to take bet­ter con­trol of your fi­nan­cial fu­ture. That is not to say there is no place for pro­fes­sional ad­vice and guid­ance, but rather than just let­ting some­one else tell you what to do, take the time and learn the skills to be able to cre­ate your own blue­print for in­vest­ing suc­cess. Ed­u­cated in­vestors with a well thought out plan will have a far bet­ter chance of select­ing good in­vest­ments.

Luke Har­ris and Matthew Bate­man are co-founders of The Prop­erty Men­tors, a Mel­bourne-based busi­ness com­pris­ing an elite team of prop­erty pro­fes­sion­als who ed­u­cate, mo­ti­vate and fa­cil­i­tate clients from all around Aus­tralia. Their new book, Let's Get Real (Ma­jor Street Pub­lish­ing $29.95) is now avail­able. For more in­for­ma­tion visit www.lets­ge­tre­al­book.com.au/giveaway

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