As we enter a new year, many of us will be focusing on the strange year we’ve had and trying to extract the lessons we’ve learned.
Rather than do the same, in today’s episode of the Michael Yardney Podcast I’d like to remind you of some of the foundations of lifetime investment success with Stuart Wemyss.
Now to be clear… this is very different to what you hear in the news, which basically focuses on short term investment trends.
One of the core tenants of my approach is that true lifetime investment success is goal-focused and planning-driven.
And the good news is by focusing on the long-term big picture trends it removes the burden of correctly guessing future short terms trends such interest rates, inflation, hot spots and the many other variables that the average analysts and many investors spend their days obsessing over.
In a culture that will always be market-focused and performance-driven, my approach sees our clients at Metropole and also my personal investing acting on a financial plan, a customised strategic property plan that we build for our clients, rather than reacting to the vagaries of the investment markets.
And that’s why I’m looking forward to my chat with Stuart Williams today because I know he takes a very similar approach.
Four Investment Principles
At Metropole our approach is built on an evidence-based foundation of four investment principles. Master these, and lifetime investment success will be available to you.
The four inner principles are:
- Faith in the future
There are so many doomsayers out there, and I regularly get trolled by them, particularly on YouTube.
But based on history, I confidently believe in the ability of a capitalistic society to prosper on the back of our collective ingenuity.
Contrary to the financially illiterate, the strategic investor refuses to react inappropriately to disappointing events.
That’s why they have a plan to follow, and they act on this plan rather than the short-term ups and downs of the investment markets.
Similar to the principle of patience, discipline sees strategic investors continue to do the right things, even if the fruit of these decisions can’t be seen in the short-term.
- Building a great team around you.
Property investment is a process, not an event.
In fact, property investment is a long-term process, and it takes up to 30 years to develop financial independence through residential real estate.
And all successful investors I know can you to educate themselves, so they become financially literate, but they’re very careful who is your bias they take, because they have learned most educators and so-called advisors have a vested interest
They also surround themselves with professionals and mentors who they are prepared to pay for advice to ensure they maximise the investment returns, by having elastic advice in the areas of not only property but finance, tax, structuring legal matters and estate planning.
These financially literate investors accept the guidance of their holistic wealth advisors and if they have sufficient disciple and allow time compounding and leverage to work its magic, their investment success is all but guaranteed.
While simple, it’s not easy.
The 8 Golden Rules of Successful Investing – part 1
Golden Rule 1: focus on the long game
Long term financial decisions promote exercising delayed gratification – patient investors are rewarded, impatient ones are not.
The best question you can ask yourself is “what action can I take today that will result in me being a lot financially stronger in 10, 15 and 20 years?”
Golden Rule 2: Know what you need and when you need it
You need to set two important goals: how much income you need in retirement and when will you retire?
Look at what you are spending today to extrapolate what you will need.
Golden Rule 3: Spend less than you earn. Then invest the difference
Commit to an annual surplus that you will contribute towards building your financial future then spend what’s left over.
If you are not a “saver” then redefine “saving” as “future spending”
Golden Rule 4: Grow your asset base first. Then tilt towards income
Select assets that provide most of their total return in growth and lower proportion of income
How can capital growth help fund retirement? Sell assets, with enough time income will be substantial, invest in other income-style assets, sell one property and reinvest in bonds, etc.
You need to develop a financial model in order to work out how much to invest, when and in which asset classes.
Links and Resources:
Buy Stuart’s book Investopoly here – use the coupon code Yardney
Some of our favourite quotes from the show:
“While it’s easier and more trendy to be a pessimist, I believe that optimism is the only realism.” –Michael Yardney
“They haven’t learned the simple fact that the cheapest advice is the one that gives you the best investment results” – Michael Yardney
“In Australia, residential real estate is a high growth, relatively low yield investment.” – Michael Yardney
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