View Full Version : Conventional Wisdom Myths
Byguest contributor Gerald Tay
Hereare four of my all-time favourite Conventional Wisdom Myths for the ordinary
investor.I define an ordinary investor as anyone who’s holding a full-time backbreaking
job,dependent on a job for income, maybe has a family to support, has some money toinvest, dreams of becoming wealthy one day, and wants badly to get out of therat race.
Thereis tons of information out there on how to invest in property: the internet,books,
seminars,newspapers, financial “gurus”, property “experts” and even your next-door
neighbour.Most of this “information” contains a grain of truth and a lot ofmisinformation.
Howdo the “gurus” fool so many people for so long? How do they get people tobelieve in
whatthey’re selling even after it has been proven time and time again to be a badidea?
Ijust realized one day how dumb the conventional wisdom is and questioned why
everyonebelieves in it.
Manyordinary investors have been fed with investment “knowledge” that is often
unusable,impractical or even nonsensical, by those with only self- interest to gain froma
saleor “experts” who know no more than the man on the streets.
Hereare the four Conventional Wisdom
Mythsfor the Ordinary Investor:
1. Buy and Hold a Property because it’s a GoodLong-Term Investment
Justlike equities and other investments, the word “Long-Term” is often misused and misunderstoodby many. It’s often uttered by salespeople who are out of touch with the changingdynamics of our highly volatile world. I mean, it’s sure going to be a long terminvestment for you… if you buy at the
wrongprice or the wrong property.
Anylong-term investment may lose money for an investor if he or she isinsufficiently educated (think mutual funds). Assuming that an ordinaryinvestor is lucky, his “anyhow invested” property goes up in value with the inflationrate. But he or she has already lost periods of great opportunities to invest(during property down-turns) that will give exponential growth of passiveincome (cash flow) to help him or her to get out of the rat race. The opportunitycost is too high.
Evena dead fish will swim downstream. A property that goes up in value by theinflation rate is called inflation growth and not investment growth. A greatproperty investment will always reward a smart investor with greater thaninflation returns plus a good positive cash flow every month.
Thebaby boomers in the USA are now facing a retirement crisis because theyfoolishly believed that property was always a good long term investment forretirement. However, the 2008 US mortgage crisis proved fatal and dashed thoseretirement dreams. They actually believed that such an event would never occurwithin their lifetime!
2. Buy, Hold and Sell Property for Capital Gains
You’veheard people who boast about how they make a fortune buying and selling properties,and you’re eager to learn how they do it. What if I say this strategy is no differentfrom gambling? And you don’t need to learn to gamble. I rather you go buy 4D orTOTO which is a lot less expensive (of course the odds are different).
Icall this the Buy, Hold and Pray strategy. As my late multi-millionairegrandfather put it, “Amateurs invest on capital gains. True-blue investors investon immediate cash flow.” Nobody knows or can predict the future, not even thegurus. A good investment makes money for the investor on the Buy, not on the Sell.
Youshould prioritize cash flow over capital gains. Your immediate cash flow returnshould be at least on par or greater than current inflation rate. If you wishto, you should be able to buy a good investment property, hold for passive cashflow and never sell
3. You Can Make Millions Investing In Property
Anyonewho wants to sell you overnight success or wealth is not interested in your success;they are interested in your money. Enough of over-hyped marketing gimmicks fromseminar “gurus”! Unless you are a property developer who buys a piece of land, buildsand sells multiple units wholesale, you
canalmost never make millions by simply being an ordinary retail investor. It’s acomplete myth that one needs to make millions in property investment to become rich.As an ordinary investor, you don’t want to become a millionaire on paper; youwant enough passive income to get you out of the
ratrace. And you don’t have to buy multiple properties (it’s a bonus if you can)to retire wealthy. Just one or two grgenerating properties with reasonablereturns will be enough.
4. You Must Invest Constantly to Beat Inflation
Neverinvest for the sake of investing. Invest only because you want to, not becauseyou need to. Invest when the investment makes sense. If it doesn’t, don’tinvest! Billionaire Donald Trump says it clearly, “Sometimes your best investmentsare the ones you don’t make
I’mpersonally out of the Singapore property market for now (that’s why I’ve moretime to write articles like this). Currently, I‘ve cash sitting in the bankdeposits with low returns. Am I even concerned about inflation? No. Why waste yourmoney buying over- inflated assets with returns that barely beat the currentinflation rate?
It’ssafer for it to be in the bank (at least I know my money will be there) than torisk losing it.
Butwhen it’s time to buy, I’ll go in big time. Is it not risky, you might ask? Notif one is educated enough to see and ride on opportunities when presented.
Who’snaked when the tide turns? There are many today who are buying on hopes of capitalgains in a booming property market. Let’s see who stands naked when the tideturns. Smart investors know how to make money both ways, amateurs only duringboom times. Invest on common sense and logic. Invest with your head, not yourheart. Be a smart property investor.
Byguest contributor Gerald Tay, CEO and
ChiefTrainer at CREi Academy Group.
good read. reinforced many of my beliefs and practises. thanks.
We are not US lei....we are singaporeans....where got same
phantom_opera
19-09-12, 20:27
most useless investment advice EVER ... self contradicting rules ... in 1st rule he said never hold long term citing example of US property crash in recent years, then suddenly in 2nd rule he said must hold forever for cash flow
really sick of such people, if his grandpa is multi-millionaire why he is still need to be a trainer ... oh i c, he spent all his inheritance
investment rules are simple in nature but very very hard to execute because it is against human nature
1. If it does not work, set a time frame and get out and your entry point must allow you to get out easily - for better deployment of capital elsewhere as well as protection of capital
2. if it does work, add to your winners
3. Know when to take your profit
by far, the most difficult is (2) and (3) ... damn hard to execute
and property is the hardest simply due to its leveraging nature and to do (2) you really need a lot of bullets
Cash is liquid....condo is illiquid.....both keep a little bit
most useless investment advice EVER ... self contradicting rules ... in 1st rule he said never hold long term citing example of US property crash in recent years, then suddenly in 2nd rule he said must hold forever for cash flow
really sick of such people, if his grandpa is multi-millionaire why he is still need to be a trainer ... oh i c, he spent all his inheritance
I read Myth 1 in its entirity and the author did not mention never to hold long term.
In Myth 2, the author said that investor if looking to Buy, Hold and Sell for capital gain should if wish to invest, buy a good investment property instead and hold for passive income and never sell.
Both 1 and 2 are not contradicting t all.
Everyone has a career and he chose to be a trainer. We should not make assumption or personal judgement about his personal life. This appears to be defamatory.
Agree with phantom. Tis socalled "advice" is total rubbish.
First of all it sounded as if these ideas are absolute.
2nd he is contradicting with himself as one saying cannot hold long term, the other say cannot sell to take profit. And it made it sound like choosing the right pty to invest is a gamble.
And he said retail investor cannot make million by investing pty. just because he cannot, does not mean others cannot. It is not luck you know.
And the last one. Stay invested may or may not beat inflation,depending how good you can invest, but doing NOTHING, as what he is doing now, DEFINITELY will not beat inflation ! Is there even a need to prove this ?
"oh what if mkt crashes, at least my cash is safe, blah blah". Typical loser, miss the boat type mind set. Basically this guy has no capacity to take risk.
This is exactly the type that will always miss the boat , and hope for a crash, aka Mr B type. And probably the loudest calling PAP this and that fault excep himself.
Had investment been so easy, every one will be rich. Just admit you are not cut out for it. No need to write some A level English test style empty analysis.
Those shouting the loudest that Govt must crash property prices otherwise they will vote opposition! :doh:
Never mind, govt sure know how to count right? Singaporeans own 90% of the properties, so 90% vote govt if property prices rise, 10% vote opposition if property prices rise no effect right? :p
Agree with phantom. Tis socalled "advice" is total rubbish.
First of all it sounded as if these ideas are absolute.
2nd he is contradicting with himself as one saying cannot hold long term, the other say cannot sell to take profit. And it made it sound like choosing the right pty to invest is a gamble.
And he said retail investor cannot make million by investing pty. just because he cannot, does not mean others cannot. It is not luck you know.
And the last one. Stay invested may or may not beat inflation,depending how good you can invest, but doing NOTHING, as what he is doing now, DEFINITELY will not beat inflation ! Is there even a need to prove this ?
"oh what if mkt crashes, at least my cash is safe, blah blah". Typical loser, miss the boat type mind set. Basically this guy has no capacity to take risk.
This is exactly the type that will always miss the boat , and hope for a crash, aka Mr B type. And probably the loudest calling PAP this and that fault excep himself.
Had investment been so easy, every one will be rich. Just admit you are not cut out for it. No need to write some A level English test style empty analysis.
Thanks for sharing. I love this article! It really speaks my heart out.
Myth 1. Buy and Hold a Property because it’s a Good Long-Term Investment
Yes, I made the same mistake by not selling in 2008 for my properties bought a few years back. I was hoping that prices will continue to climb.
When the financial crisis came, I was left holding the depreciating assets with declining return.
Mr. Tay precisely pointed out what I lost most - the "great opportunities to invest" during the downturns.
I learned my lesson. I've sold all my portfolio in this boom to lock in the profit and wait for the next opportunity.
Myth 2. Buy, Hold and Sell Property for Capital Gains
I can't agree with him more on "A good investment makes money for the investor on the Buy, not on the Sell."
I am always more excited when I buy an undervalue property than the moment I sell it for a profit. Because the moment I buy I immediately know I'll make money from its +ve cash flow and future capital gain.
Myth 3. You Can Make Millions Investing In Property
An ordinary investor can't, but a good investor can. I know people who have done it and I'm grateful that I also earned my 1st bucket of gold there.
Myth 4. You Must Invest Constantly to Beat Inflation
I strongly agree. Investors lose money by investing in the wrong thing, not by failing to beat inflation.
I'm also totally out of the property market now and putting all my previous profits in deposit. Inflation can only go up by single digit but I don't want to see prices of my assets drop by double digits. But when I see others suffering from the later, I'll definitely go in again!
Actually no right or wrong. Property Investment is not one size fits all kind.
To me those who are rich will always win in property investment.
If my father has past down 3 paid up property & $500K cash, I will definitely
not sell my property and just collect rental and buy more when opportunity strike like what this guru said. I will not even bother to waste time on this forum.
But unfortunately not all are so rich. A friend of mine follow one of this guru principle. In 2007, he felt that property is too high and waited for crash. 5 years later his children all grown up and he is still waiting. I blur blur went in without any knowledge of property investment made money. So sometime timing and luck still count for commoners.
But for pure investement I think this guru is right.:D
The article reminds me of what Jim Rogers said about 'conventional wisdom' in his book A Gift to My Children: A Father’s Lessons for Life and Investing (http://books.google.com/books?id=0_EeE-uKrQQC&dq=isbn:1400067545&ei=rRgZTp2QJ5PekATozLXhAg),:
Most perceived wisdom is a misconception and wildly inaccurate.
Rely on your own intelligence … Do not let others do your thinking for you.
I was hesitating whether to post this article and eventually decided to go ahead to have a feel of the reactions from the community.
I read the article with an open mind and without any preconcieved idea of the author's intents.
I think the author was simply advising ORDINARY investors the following:
1. Do not just buy and hold a property simply because people said it is a good long-term investment. Buying the right property at the right time is more rewarding. The opportunity costs of buying during the peak is rather high.
2. A good investment in property is one that makes money for the investor on the Buy and not on the Sell. Capital gain can be unpredictable.
3. As a ordinary investor, one needs not have to buy multiple properties. Just one or two with reasonable returns will do. - No need to stretch oneself.
4. Do not invest just for the sake of investing. Be careful with inflationery growth verse investment growth.
Of course the author stated that he preferred cash to property right now because he saw a lot more downside than upside going forward.
If you are NOT ordinary investors, you may not quite agree with him. Then again, the author stated clearly that he was communicating with ORDINARY investors who may find the article useful.
most useless investment advice EVER ... self contradicting rules ... in 1st rule he said never hold long term citing example of US property crash in recent years, then suddenly in 2nd rule he said must hold forever for cash flow
I think you need to think like an idiot or amateur when you read what he has written
what is saying about never hold long terms is telling amateur investors that even for long term investment, you must always consider exiting if the situation becomes really bad, or the offer price is too good to say no.
As for the 2nd rules, he is probably saying it is better to invest in a property that can self finance itself immediately so you need to worry about paying for mortgage etc even during bad times. perhaps a good example will be having a property that is near university.
the author is one of those who sells pty seminars, period.
different folks different strokes.
a bird in hand way better than two in the bush.
(sounds like onanism lol)
the author is one of those who sells pty seminars, period.
It is better to hear from people who has no vested interest in selling property directly or indirectly.
Not sure if the author has any vested interest but from his writing, he should not because anyone selling property directly or indirectly through seminars would not write the way he did.
I think what august is probly trying to point out is that if his techniques are so sound and solid, then he should be making big $$$ by putting his ideas into practice and relaxing at his beachside home and not having to sell seminars etc to make a living....
there are plenty of these 'gurus' ard...
I think what august is probly trying to point out is that if his techniques are so sound and solid, then he should be making big $$$ by putting his ideas into practice and relaxing at his beachside home and not having to sell seminars etc to make a living....
there are plenty of these 'gurus' ard...
Everyone has a career and he chose to be a trainer.
There are also many management gurus like Peter Drucker and Tom Peters. Can we say that these management gurus should be running successful companies instead of writing books? They are good in the subjects they researched but they may not be good in making management decisions.
There are also a lot of great economic advisors who advise governments, corporations and institutions. They are good in what they know but they may not good in executing strategies.
A meaningful career or interest in their jobs drive people to do what they are doing.
Everyone has a career and he chose to be a trainer.
There are also many management gurus like Peter Drucker and Tom Peters. Can we say that these management gurus should be running successful companies instead of writing books? They are good in the subjects they researched but they may not be good in making management decisions.
There are also a lot of great economic advisors who advise governments, corporations and institutions. They are good in what they know but they may not good in executing strategies.
A meaningful career or interest in their jobs drive people to do what they are doing.
thats why geylang is always full of life cos a lot of people working there....:D:D:D
phantom_opera
20-09-12, 13:15
There are a few types of gurus
1. Those who dun know what they are talking about but pretend to know
2. Those who know what they are talking about but oversell their success stories to sell their books/seminars (then later they discover selling books/seminars easier to make money they continue doing that)
3. Those who know what they are talking about but are sincere to help people
Unfortunately (3) is almost extinct liao
Everyone has a career and a day job. People find their own niche and advace their career in their own way.
There is nothing morally wrong to earn a living by sharing with people what they knew, what they have researched and even their past success stories.
People in management will know that often your past success could not be replicated in a new or different environment. Your pass success only gave you the learning experience not to make the same mistake that lead to your success.
Peter Drucker need not be a successful manager to write excellent management book. Similarly, you need not be successful in investment to be good in investment consultanting.
How many personal bankers are actually good in managing their own assets? They earn their living by helping others to manage their wealth. Whether you trust these bankers and whether you want to enagge them very much depend on your needs and your past experience with these bankers.
Law professor Walter Woon was made AG but left after serving only one-term. Can we say that Prof Woon has not been successful during his term as AG? We should look at it objectively and take the view that Prof Woon is more comfortable working with the academia. Maybe, Prof Woon was ahead of his time.
So here we have this author who share with ORDINARY investors his experiences and knowledge. Of course as a writer, his writing is subject to critics. We could critically debate or criticise his writing. However, we should not make defamatory remarks about his profession. This is the basic respect to our fellow beings.
There is nothing morally wrong to earn a living by sharing with people what they knew, what they have researched and even their past success stories.
Agree. When I started investing in properties ten years ago, market was bad and few were interested to talk about properties. I wish I could learn from experienced gurus who are willing to share so that I could make less mistakes.
We could critically debate or criticise his writing. However, we should not make defamatory remarks about his profession. This is the basic respect to our fellow beings.
Well said.
So here we have this author who share with ORDINARY investors his experiences and knowledge. Of course as a writer, his writing is subject to critics. We could critically debate or criticise his writing. However, we should not make defamatory remarks about his profession. This is the basic respect to our fellow beings.
literature that is anecdotal, offers no concrete details to back up its assertions, and hints of enticement, can be summed up by a simple term - marketing. :)
Agree. When I started investing in properties ten years ago, market was bad and few were interested to talk about properties. I wish I could learn from experienced gurus who are willing to share so that I could make less mistakes.
as long as you are willing to pay, it seems there are no shortage of "experienced gurus" willing to "share". :)
literature that is anecdotal, offers no concrete details to back up its assertions, and hints of enticement, can be summed up by a simple term - marketing. :)
Investment is as much an art beyond the hard data. Ask any experience or successful businesmen and they will tell you beyond all the hard data, it is instinct, gut and the ability to make the call when situation arises that make the difference.
The author is sharing with ORDINARY investors the soft part of decision making. It makes a difference to people who think is useful.
Do criticise its contents if we believe otherwise.
as long as you are willing to pay, it seems there are no shortage of "experienced gurus" willing to "share". :)
No one will pay for things they do not find useful. Market forces are at work all the time.
No one will pay for things they do not find useful. Market forces are at work all the time.
people will pay for things that they THINK is useful.
and unlike other similar courses, the preview is not even free (http://www.crei-academy.com/live-event/) lol
once paid if not useful also too late liao.
this is not market forces at work, this is marketing at work.
The key is contrarianinvesting but only few have the guts to do it..... If you buy when everyone is selling.... How much more can it drop? So your downside is capped....
people will pay for things that they THINK is useful.
and unlike other similar courses, the preview is not even free (http://www.crei-academy.com/live-event/) lol
once paid if not useful also too late liao.
this is not market forces at work, this is marketing at work.
If the seminar is not useful, you will at most be cheated once. Your words of mouth will ensure the failure of future programme. Market forces are always at work.
The key is contrarianinvesting but only few have the guts to do it..... If you buy when everyone is selling.... How much more can it drop? So your downside is capped....
Absolutely! When all hard data pointing to a depress market, you need experience and gut to make the buy call. Good investment is more than hard science. It is an art that you learn through experience.
phantom_opera
20-09-12, 22:54
If the seminar is not useful, you will at most be cheated once. Your words of mouth will ensure the failure of future programme. Market forces are always at work.
Singaporeans if make money in one stock will tell 1000 people, if lose money will sing silence is golden ... of course there will be exception like Lehman Minibonds
Singaporeans if make money in one stock will tell 1000 people, if lose money will sing silence is golden ... of course there will be exception like Lehman Minibonds
If you are being charged $4 for a plate of average quality chicken rice at a hawker centre which should be just $3; you are not likely to buy from this stall again. You will tell a lot more people to avoid this stall.
Similarly, if you receive poor service with an airline, you will tell alot more people about it.
The point is you do not lose face attending a louzy seminar and regretted it. On the contrary, you are not likely to tell anyone if you make losses in an investment.
Successful service providers understand basic marketing and consumer behaviour.
If the seminar is not useful, you will at most be cheated once. Your words of mouth will ensure the failure of future programme. Market forces are always at work.
strong word, nice. :D
strong word, nice. :D
You do have a point that the preview is not free unlike other seminars.
This author/trainer obviously understands marketing and consumer's behaviour. There is a perceived value of the product if one needs to pay for it. The fee charge will also serve to attract serious investors and wipe out those looking for a free lunch. If you are the one to market the seminar, you will need to make such decisions. Yes! marketing is at work.
You do have a point that the preview is not free unlike other seminars.
This author/trainer obviously understands marketing and consumer's behaviour. There is a perceived value of the product if one needs to pay for it. The fee charge will also serve to attract serious investors and wipe out those looking for a free lunch. If you are the one to market the seminar, you will need to make such decisions. Yes! marketing is at work.
hahaha, or just suckers judging from the quality of the website and literature.
hahaha, or just suckers judging from the quality of the website and literature.
Everything has a value or perceived value. The perceived value depends on the expectation of the individual. When the expectation and perception gap narrows, the consumer is happy. When the gap broadens, the consumer is disappointed.
You see them as sucker and that is understandable.
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