Most investment counsellors I have seen make an assumption that if the investment performs well, then any financier can definitely make decent money out of it. To explain, theexternal factorsalone determine the return.
I beg to differ. Consider these for example:
– Ever heard about an example where 2 property backers acquired identical properties side-by-side in the same street at the same time? One makes good money in rent with a good renter and sells it at a good profit later; the other has significantly lower rent with a bad renter and sells it at a total loss later on. They can be both employing the same property management agent, the same selling agent, the same bank for finance, and getting the same advice from the same investment advisor.
– You could have also seen share investors who acquired the same shares at the same time, one is forced to sell theirs at a complete loss due to personal circumstances and the other sells them for a decent profit at a better time.
– I have even seen the same builder building 5 identical homes side by side for 5 financiers. One took 6 months longer to build than the other 4, and he ended up having to sell it at the wrong time due to private money flow pressures whereas others are doing miles better financially.
What is the sole difference in the above cases? The backers themselves (i.e. Theinternal factors).
Over time I have reviewed the fiscal positions of a couple of thousand backers personally. When folks ask me what investment they should get into at any particular moment, they expect me to compare shares, properties, and other asset groups to advise them the correct way to allot their money.
My reply to them is to always ask them to go back over their record first. I'd ask them to list down all of the investments they have ever made: cash, shares, options, futures, properties, property development, property refurbishment, for example. And ask them to tell me which one made them the most money and which one did not. Then I recommend to them to stick to the winners and cut the losers. Put simply, I tell them to invest more in what has made them decent money during the past and stop making an investment in what hasn't made them any money in the past (assuming their money will get a 5% return every year sitting in the bank, they need to at least beat that when doing the comparison).
If you take a little time to do that exercise for yourself, you will very swiftly discover your favourite investment to take a position in, so that you can focus your resources on getting the best return rather than allocating any of them to the losers.
You will ask for my motive in choosing investments this way instead of taking a look at the theories of diversification or portfolio management, like most others do. I simply think the law of nature rules many things beyond our systematic understanding; and it is not smart to go against the law of nature.
As an example, have you ever realized that sardines swim together in the sea? And in a similar fashion so do the sharks. In a natural forest, similar trees grow together too. This is the assumption similar things attract each other as they have affinity with one another.
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Tags: investments
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