Whether you’re an experienced investor, have recently purchased your first property or are looking to get started, we hope that these 10 tips will help you to become a more successful investor.
These tips are based on the first-hand experiences and life lessons of Tim Guest – Managing Director of Infinite Wealth and Australia’s leading financial educator.
Tim is best known for his accomplishments as a property investor, entrepreneur, motivational speaker and philanthropist. He is also known for his leading financial workshops, promoting financial literacy and education around the globe.
We sat down with Tim to create this top ten list, here is the result.
1. HAVE A VISION
Before you begin implementing any investment strategy, you should first ask yourself about your vision. What are you wanting to achieve by becoming an investor?
Some invest to gain flexibility and security with their money. Others desire an asset base that can produce a passive income to help them to support their family and lifestyle. Maybe you’d like to retire early to spend more time on the things you are really passionate about (traveling, hobbies, starting a business or helping others.)
By defining your goals and having a clear vision before you start, you will better understand your “why” and your mission. This will help you to take inspired action and make better decisions to achieve what you want.
Every successful investor has a clear vision of what they are trying to achieve. You should too.
2. SET YOUR BUDGET
Getting rich is a system. Financial success has nothing to do with luck or chance. It’s a deliberate result of strategies applied over time. This is why having a budget is important so that you know how much you need to set aside each week towards your investments.
For some of you hearing the word “budget” makes you want to run for the hills or put your head in the sand. But it doesn’t need to be as difficult, complicated or overwhelming as some make it. Nor will you have to sacrifice your current lifestyle to save that little bit extra on the side to fund your investments.
Make things simple and easy by putting automatic structures in place and creating good habits. Put money aside for your investments with as little thought and decision as possible.
These days, most bank accounts allow you to set up automated direct debits between your accounts. So, why not spend 5 minutes setting up an automatic weekly transfer from your every-day transactions account to your savings account? Then you won’t even have to think about it.
This is what we call “paying yourself first.”
3. TAKE ACTION
“The only thing in life that makes a difference is action.” ~ Tim Guest
There will always be reasons not to invest, but you should never use these as excuses for not getting started.
Investing is a long-term strategy, the earlier you start the better. By wasting several years waiting for the perfect moment to invest your money, you’ll end up missing out on great opportunities or even miss out entirely (if no action is ever taken).
Many newbie investors get confused, overwhelmed or scared into inaction by news channels, public opinion and sentiment or conflicting statistics, trends and reports released by larger organisations.
This is why it can be more effective to surround yourself with a team of industry experts who know their stuff, rather than trying to be across everything yourself. After all, who has time for that!
At Infinite Wealth, we work with our clients to help them to understand their numbers in detail, and put a Strategic Wealth Plan in place so they can achieve their goals. This plan provides them with a clear insight into their current financial position, where they are heading and what they need to do to get where they want to be.
If you’d like us to help you to develop a plan, enabling you to take action with your investment strategy, for a FREE Planning & Strategy Session.
4. BASE DECISIONS ON DATA, NOT PEOPLE
When investing money, people tend to follow a “pack mentality’ – becoming heavily influenced by the crowd and what others are doing around them. The problem with doing this is that more often than not, the crowd is wrong.
Market sentiment and speculation cause people to buy and sell at the wrong times – selling when the market is down and buying near the peak of the cycle. With investing, timing does play a part, but what you buy, where you buy it and what your long-term strategy is, are also important components.
Some common myths that exist relating to property investment are to buy properties located within 10kms from the city or within blue chip suburbs. Yet, historical evidence and data reveal the opposite. Greater capital growth is often seen in more affordable locations, including suburbs with plenty of infrastructure plans, new homes and population growth, and even higher crime rates.
When it comes to your investment strategy don’t base your investment decisions on the news or advice from your friends, family or your supposedly “finance savvy” neighbour (unless of course, they are extremely successful as an investor themselves). Instead, seek the facts and surround yourself with a team of experts who are exactly where you want to be.
5. INVEST WITH A LONG-TERM VIEW
Before you start investing you should consider that investing is a long-term strategy and not a short-term punt.
Those who are most successful have a plan. They know where they’re heading, follow a proven strategy, take the emotion out of their decisions and make educated choices based on evidence and research. They also buy properties that are fairly valued and within an area that has proven and above-average projected long-term capital growth.
Try not to let short-term crises impact your investment decisions. Despite possibly reducing the value of your investment in the short term, temporary market fluctuations should have minimal impact on the long-term growth of your portfolio.
6. ACTIVE vs PASSIVE INVESTING
As Warren Buffet says, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
Although Warren Buffet is known for his success in the stock market, his statement also relates to property investing.
Did you know that despite market fluctuations over the years, Australian housing prices have surged by a massive 6,556% since the early 1960s? An average increase of 8.1% every year!
Don’t you wish that you could’ve bought some property back then? Well, if things continue to trend the way they have been, we could be in the same position 60 years from now.
Conversely, many people want to “get rich quick” and try to invest for short-term profits through development or renovation strategies. While the potential short term profits are attractive, these speculative strategies involve much higher cost and risk.
This is why it is often better to be a passive investor (holding onto your assets for the long haul) rather than actively buying and selling your assets based on fluctuating markets or an economic rise or downturn.
7. THE SECRET IS MANAGING RISK
Property investment is often considered to be a risky strategy by those outside of the industry. Yet with financial buffers and the right insurances in place, it doesn’t have to be.
The trick is to focus your attention on positively or neutrally geared properties rather than developments or negative gearing, and putting safety nets in place to protect you and your investments at all stages of the economic cycle. This ensures that you are able to fund your asset base, even during economic downturns.
It’s also important to structure finance correctly to ensure that you protect yourself from banks trying to extend their reach over your assets and ensure that you have insurances in place to protect you from the unexpected changes that can happen in a long-term strategy. Life insurance, income protection and landlord insurance are just some examples of the protections required to make sure you can sustain your strategy for the long term.
8. THERE ISN’T ONLY ONE MARKET
Despite what some media sources tell you, there are various property markets across Australia. While many generalize the “Australian property market” to being a single market, there are actually many submarkets around Australia.
For starters, most states and capital cities have their own markets and are at different stages of the property cycle. Even each state can be broken down into smaller markets segmented by geography, price, and type of property.
Don’t fall into the trap of believing the media’s generalisations about the Australian market being up or down as fact. Where you should buy really depends on the stages of the economic cycle. In some cases, it could be worth expanding your horizons to look at interstate opportunities.
As we mentioned earlier, it’s not about when you buy, but where you buy.
9. IT’S A BUSINESS NOT A HOBBY
Let’s say you’re considering starting a business. Would you seek advice before doing so? Would you spend time researching the market and industry? Would you be prepared to spend a little bit extra to get improved results or returns?
With property, it’s no different. You must treat your investment decisions like a business. Similar to running a business, the secret to investing is to surround yourself with the best possible team and make decisions based on fact, not emotions.
Moreover, consult with finance and accounting professionals to ensure that you are set up with the best ownership and asset protection structures so that you can legally use the taxation system to your advantage.
10. DIVERSIFY (IT’S NOT ALWAYS ABOUT PROPERTY)
Before we even start to talk about the importance of diversifying, I’d like you to consider the following: “How many millionaires invest in only 1 thing?” The reality – none. So, why would you?
A key reason that many investors start with property as an investment, is because they can leverage their money into a larger asset. As an example, if you want to buy a $500,000 property, you will only need 5 or 10% of that purchase, rather than the whole amount. You can’t really do this with the other asset types, particularly when starting out.
While property offers this advantage and is a great way to invest, its dangerous to “put all your eggs in one basket” and successful investors will spread their risk by investing in multiple asset classes, that operate on different economic cycles.
This will provide greater stability to your overall strategy particularly during the inevitable downturns that occur in every cycle. This principle can also be applied within a particular asset class. As an example, even when buying property, it’s recommended that you invest in multiple capital cities and locations for long term success.
So, there you have it – 10 important tips to help you to be a more a successful investor. As an added bonus for reading to the end, here’s an 11# tip to set you on your way…
11. GIVE BACK & REWARD YOURSELF
As we mentioned at the beginning of this article, part of developing a successful investment strategy is to determine your vision and your why.
Some strive to develop their wealth so that they can afford luxurious possessions, such as a fancy Ferrari or a shiny Rolex watch. But one’s motivations for developing wealth doesn’t have to be fuelled by materialism or tangible items.
Sometimes the intrinsic motivations and intangible benefits of financial freedom can be just as powerful and rewarding.
Like Tim Guest, our Managing Director at Infinite Wealth, you may prefer to use your wealth to give back to the community, to help others or to feel that you are making a valuable contribution to those around you.
There are many benefits to being financially free. Not all of the wealthy are materialistic or greedy, despite what some may assume. For example, you could use your wealth to become the person that you’ve always wanted to be – now having the freedom to choose how you spend your time and your money.
Tim regularly participates in fundraising and charity events and is passionate about supporting suicide prevention and awareness, homelessness and sick and disadvantaged children. Infinite Wealth also donates 10% of its profits to charity and community projects such as PMH Foundation, Youth Focus and the Telethon. Maybe this is something you’d like to do?
As a successful investor, you will be able to sit back and relax, knowing that all of your finances are taken care of, being able to focus your time and attention on the things that you love and make a lasting and significant difference to the world around you.
If you want this kind of life and have the courage to take action, we offer you a one-hour with one of our expert Client Managers (valued at $295). Yours for free if you register now.
1. Get a clear idea of your current situation and how you’re tracking financially
2. Find out what you need to start doing now to reach your financial goals
3. Gain insight into investment opportunities and/or strategies that are best suited to your personal circumstances
to take one step closer to achieving your financial goals and living the life you really deserve.