Slow and steady is boring, but wins in property investment

When I was but a callow youth of 17, I was introduced to a friend of a friend by the name of Dan* who quite openly told me that he had paid for a sun-filled holiday to Spain by selling lottery-type tickets that he had created. hoarding-money

So far so unremarkable, until he brazenly admitted that the cash prizes he’d offered were completely fictitious.

Even as a naive plonker of such a tender age I remember being simultaneously quite amazed and rather appalled at the sheer front of this preposterous scheme.

Dan confessed that he felt “a bit bad” when selling tickets to old ladies (shocked yet?) but his justification was that he would probably never get caught (to my knowledge, he didn’t) and even if he was busted, as a minor the penalty would be light (perhaps true, but he might have got a tremendous physical marmalizing – perhaps deservedly – had one of the ticket purchasers gotten wind of the unholy scam…).

If you stop to think about it were are two elements of consideration for Dan there: the moral implications and the severity of the penalty.

Would you park in a disabled car parking space, for example?

Probably not, but if it was an empty supermarket car park late at night, maybe it wouldn’t seem so bad?  


If the penalty was capital punishment you most definitely wouldn’t risk it, but if the charge was a $5 fine and there was nobody around, perhaps you might.

This concept of weighing up outcomes has given rise to a range of fascinating studies.

It’s fairly well known that people are more inclined to casually drop litter if there is already existing litter in the locality.

It’s tough to stop schoolkids light-fingering lollies if they see mates getting caught and only being given a ticking off by the police.

But if parents present different punishments then the disincentive may be stronger.

I recently saw it noted in the Twitterverse that one of the “most annoying modern trends” is for economists to add “-onomics” on to the end of words from virtually any other field of study, and this area is no exception of course, sometimes being known as ‘criminomics’.

Process and outcome

This idea of balancing up behaviour versus outcome is rather an important one in investment and in other areas too.

Take the example of a game of blackjack (also known variously as 21 or pontoon).

Suppose I have a hand of a King and a Jack thereby totalling 20, yet in a frenzied fit of excitement exclaim to the casino dealer “hit me!”…and he deals me an Ace.

Cue much high-fiving and childish excitement, but was this a smart play? Of course not.

It was simply lucky which is not the same thing.

Getting away with it doesn’t make it smart. piggy bank broke bank money lose saving

And if I carried on in this manner then eventually I would lose heavily which is precisely why Kenny Rogers crooned: “…you never count your money, while you’re sittin’ at the table…”

This is also why bridge players place so much emphasis on playing a hand ‘correctly’.

In games such as bridge which involve an element of luck they will still lose some of the time, but an experienced player knows that if he plays his hands well enough, over time the odds will shift in his favour and he will win.

The process is seen to be as being as important as the outcome (which is why bridge is one of the few card games that could be played not blind and still retain a semblance of being interesting).

Risk in a portfolio

Can there be room for speculation in an investment portfolio?


Unfortunately most people do not accurately assess (or sometimes even care!) to what extent their portfolio consists of pure speculation and what element is a solid investment.

This is why fund managers still have a role to play in investment.

Warren Buffett famously argued that gold is a poor investment selection because it pays no income and its price action can be volatile and risky.

In principal this is absolutely correct in terms of an investment approach.

Yet other fund managers have challenged this and said that holding a carefully controlled percentage of a portfolio in gold can be worthwhile because of its potential to skyrocket in value.

Speculation versus investment

In essence there is no problem with speculating with some of your portfolio.

I have a crack myself in stocks, mainly with ordinary results, it has to be said.

One of the problems facing those who choose to include property in their portfolio is that due to the leverage that is commonly employed, property tends to quickly represent a disproportionately high level of the portfolio’s risk. property mortgage finance money

For this reason, property should normally be considered only as a long-term investment.

The term of a mortgage represents a reasonable guideline to what lenders see as an acceptable timescale for managing their own risk.

Thus when investing in property it is particularly important to stick to the basics and fundamentals of long-term demand, rather than trying to be too smart by chasing the latest fads and ideas or trying to time a volatile, illiquid or thin market with ‘expert’ precision.

Through taking on high levels of risk and maximising leverage it is perfectly possible that you might generate fast returns in such a way, but if the risk threatens to send you bankrupt is the possibility of a good outcome really worth the potential severity of the punishment?

“Getting away with it” doesn’t justify the risk.

It’s not what many want to hear but boring can be best when it comes to investment and a realistic timescale for property ownership is the life of a mortgage term.

And the best locations to invest in are also what you might term ‘boring’ with a relatively predictable long-term demand. Slow and steady wins the race.




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Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog

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