ARE YOU COMMITTING THE 7 DEADLY SINS OF INVESTING?

Jhai Mitchell

Investors themselves often pose the greatest threat to their financial security in times of uncertainty, which has released a list of the seven deadly sins for real estate investors.


The best strategy for investors in the current economic climate is to stay calm. “Fear is a great motivator but a bad guide,”. “People who act cool will make better decisions than those (who) act emotionally.”


Investors must remain disciplined and invest for the long term in order to reap the benefits of their efforts once the current troubling times pass.



The seven deadly sins for real estate investors in the current climate are:



1. Instant gratification. Over emphasising immediate rewards at the expense of long-term needs.
2. Naive diversification. Taking on unnecessary risk by dividing money based on rules of thumb without evaluating risk tolerance or return expectations.
3. Overconfidence. Believing too much in one’s prowess as market prophet when markets are just in a bullish cycle.
4. Belief persistence. Ignoring evidence or indicators that are contrary to what is believed to be in one’s own best interest.
5. Overweighting recent events. Giving too much importance to recent events.
6. Loss aversion. Planning more for worst-case scenarios to minimise losses rather than concentrating on how to best maximise wealth.
7. Fear of regret. Doing nothing because of not wanting to make the wrong decision.


The firm provides the following tips to help avoid committing the deadly sins:



• Constructing an appropriate investment plan. Determining an appropriate risk tolerance in conjunction with a professional.
• Stay diversified. Being properly diversified to limit downside losses in difficult markets.
• Think long term. Staying committed to a long-term investment strategy and not reacting hastily to what will ultimately be transient events.
• Delay of gratification. Resisting making rash decisions when markets are racing or retreating that you’ll regret.


Apply these principals and you keep a strong foundation to build wealth.


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