The psychology of investing

What does it take to be a successful investor? Does it require a particular personality type? Are there certain qualities that help one win in the world of property investment? Without question there are traits that can help you succeed on your property journey. Let's examine some of them.

Being bold when needed

Being an investor is an instant act of bravery. It's understandable to feel afraid and hesitant about dipping your toes in the property investment market. However, the evidence shows that property in Australia is one of the most reliable and rewarding investments there is. And being bold doesn’t stop there.

A good investor is unafraid of swimming against the tide. This is a trait commonly found in leaders but it's critical for investors. There is a clear logic to it too. If everyone is investing in apartments in say, Western Sydney, it stands to reason that there will, at some point, be an oversupply which will lead to a market correction. This is due to the lag between demand and construction. Indeed this is what is forecast to happen in 2017. Remember the housing collapse in Perth a few years ago? We've written before how WA is still struggling to recover. In hindsight it’s easy to see that the mining boom would end and that the high property prices weren’t sustainable. Yet many investors got burnt following the herd, not being bold enough to look for an alternative market.

Boldness is striking into a market not considered red hot, but one that you know is about to take off. However, there is a difference between bold and foolhardy, as we will point out.

Meticulous and thorough

The successful investor isn't just putting his or her hard earned capital into an investment purely on a whim. They're using detailed research and solid data. Their bold approach is founded on the strongest of evidence which, of course, means the strategy isn't really bold at all. 

Let's talk about risk.  Billionaire Warren Buffett is fond of saying: "Risk comes from not knowing what you're doing." In other words, ensuring that as an investor you've got every possible piece of information you'll need to make an accurate choice. We've written in the past how there isn't a single property market, but many diverse and strikingly different markets across Australia. Thinking you can toss dollars into the property ocean and come back with dividends simply won't work. So what does meticulous and thorough mean in this context?

It means obtaining all the data on the area you're interested in investing in. This includes: property price reports; demographics; infrastructure; its local economy; its population forecast and its population migration trends, as well as how it compares to the rest of Australia and what its long term capital growth and rental yields are. 

It also means doing your sums and making sure you can afford the property.  It's best to budget conservatively in case you’re hit with unexpected costs or sudden downturns in the market or a change in your own financial situation. Many investors have foundered from being too greedy. Being meticulous about what you can afford means that you’ll always sleep better at night.

Courage of one’s convictions

This trait is key to successful investors. It essentially means not being panicky and sticking to the strategy you’ve chosen. Certainly DPN advocates a longer term strategy of incremental capital growth and positive rental yield. This may not always be the most shiny or alluring strategy but it’s proven to be a winner. So don’t be tempted to suddenly sell up your investment property if you notice there’s a large rush somewhere else. As discussed, these things are usually ephemeral. Persistently staying through the hard times and not panicking every time there’s a maintenance bill will reap rewards in the end. 

Staying agile and informed 

We hear of the importance of agile workplaces. The same quality is just as important to investment. This means keeping up to date with the latest property developments and trends and reading widely. It also means questioning your long term goals and being prepared to shift them if necessary. Also checking how your properties are performing and always questioning your strategy. So while being determined to persist is valid, it’s equally important to be open to adjusting or changing your plans if needed. The essential point is that every decision should be made based on hard data and research.