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Your Investment Strategy

Monday, December 5, 2011

The best way you can ensure that you can cope with the psychological pressure of making the best financial decisions not only for your future, but for your family as well, is to have a plan and stick to it. Don’t attempt to be the best, just the most balanced and disciplined.

According to a study published by Frank H Knight, people dislike uncertainty more than risk particularly when the odds are unknown. It is not uncommon for investors without a strategy to react to uncertainty by selling. They can cope with the risks of owning an investment property, but not with an uncertain Real Estate market. And if right now you feel this way, it's only human nature.

Identifying and being aware of this behaviour is important not only so you can make informed decisions, but also identify opportunities in a market of "irrational" investments. It is important to remember, specially in times when the market seems to be going nowhere, that short-term volatility does not equal to risk, if you have a long term strategy.

There are several strategies that those willing to invest in Real Estate can adopt. You must consider you holding period, your time available, your capital position. You can also choose between a passive and active strategy.

If investors really want to make things happen, they are better off borrowing more money and buying a second property than selling the one they own, provided they bought sensibly in the first place. Astute investors keep buying more properties as their borrowing power increases with the rise in equity that accrues with capital appreciation and rising rents.

Holding investment properties long-term means greater wealth when it is needed , usually on retirement when income from work ceases.

As in any investment , some short-term self-sacrifice and delayed gratification is involved. Investors buying their first property are usually stretching themselves just to get a foot on the investment ladder and there is little money left over for luxuries. It is not until their portfolio grows in size and qualty that they will be less stretched and more able to increase their lifestyle spending without selling a property to do it.

The best strategy for most investors is to embark on a program of planned property investment at their earliest financial convenience – usually when the equity in their family home reaches a fairly high level and after consulting their accountant.

Learn to evaluate everything devoid of sentiment – maintain confidence in the ability of the investment strategy you have chosen.

To discuss your particular investment property management strategy, please call Peter today on 8404 3111.


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