Property vs Shares
Discussion
I was listening to a podcast today from a hedge fund manager - he was saying that psychology is the number one thing that creates a successful investor.
My plan was to DCA into some funds, but then i was thinking from a psychology standpoint... Would i really stick money into a fund every month if it had dropped every consecutive month for a year? Or two years? I don't think i'd be able to stomach it (even if fundamentally that meant i was getting the units on sale/cheaper)
For example, fidelity found that their best performing investment accounts were owned by people who had set them up and comlpletely forgotten about them (e.g done nothing for years and thus not sold low bought high) https://www.businessinsider.com/forgetful-investor...
I have been thinking about what assets to put my surplus cash into.
This has in the past been property (btl) and has worked well - however i have had the feeling i "should" be diversifying and buying some shares/funds...
This is all well and good, but the bull market has been long, and i have realised - i think my emotions as that of any normal investor - selling when there is fear and buying when things are looking good. (most of us do this - even if we don't admit it)
This had me thinking about the properties i have bought. What has made them effective is actually their illiquidity. I can't wake up and liquidate them all based on some feeling or fear. There is a huge cost and time involved to do so - so i do nothing. Over the long term that is an excellent strategy.
They are tangible, i can improve them, i can easily value them based on their income. They pay monthly (so even if prices are falling, psychologically makes it easier to handle)
On reflection, i think i'll just crack on with property. When a property is completed, it almost feels like the money is "gone" and i can't really do anything silly. I have 5 year mortgage terms, and 12 month tenancies. The decision making window is more like twice in a decade than daily.
People don't mention this side of things too much - but really it has a huge huge impact.
My plan was to DCA into some funds, but then i was thinking from a psychology standpoint... Would i really stick money into a fund every month if it had dropped every consecutive month for a year? Or two years? I don't think i'd be able to stomach it (even if fundamentally that meant i was getting the units on sale/cheaper)
For example, fidelity found that their best performing investment accounts were owned by people who had set them up and comlpletely forgotten about them (e.g done nothing for years and thus not sold low bought high) https://www.businessinsider.com/forgetful-investor...
I have been thinking about what assets to put my surplus cash into.
This has in the past been property (btl) and has worked well - however i have had the feeling i "should" be diversifying and buying some shares/funds...
This is all well and good, but the bull market has been long, and i have realised - i think my emotions as that of any normal investor - selling when there is fear and buying when things are looking good. (most of us do this - even if we don't admit it)
This had me thinking about the properties i have bought. What has made them effective is actually their illiquidity. I can't wake up and liquidate them all based on some feeling or fear. There is a huge cost and time involved to do so - so i do nothing. Over the long term that is an excellent strategy.
They are tangible, i can improve them, i can easily value them based on their income. They pay monthly (so even if prices are falling, psychologically makes it easier to handle)
On reflection, i think i'll just crack on with property. When a property is completed, it almost feels like the money is "gone" and i can't really do anything silly. I have 5 year mortgage terms, and 12 month tenancies. The decision making window is more like twice in a decade than daily.
People don't mention this side of things too much - but really it has a huge huge impact.
Edited by trowelhead on Tuesday 16th October 20:08
I could not agree more.
The amount of times I've said I'm selling property, only for issues to pass by and all of a sudden things are rosy by the time the opportunity to sell comes around.
I purchased bitcoin at £80 and £130 a coin. It went to around 800 and then back to around £100. The joke was it happened so fast I hadnt figured out how to sell. After that I couldn't even be bothered to find out, I lost the password, at one point lost the actual account. I finally decided during the next boom years later to find out how to sell. As soon as i'd found out how to sell I started selling little bits all the way up, regreting each time it went up further.
Sometimes doing nothing is definitely the way.
The amount of times I've said I'm selling property, only for issues to pass by and all of a sudden things are rosy by the time the opportunity to sell comes around.
I purchased bitcoin at £80 and £130 a coin. It went to around 800 and then back to around £100. The joke was it happened so fast I hadnt figured out how to sell. After that I couldn't even be bothered to find out, I lost the password, at one point lost the actual account. I finally decided during the next boom years later to find out how to sell. As soon as i'd found out how to sell I started selling little bits all the way up, regreting each time it went up further.
Sometimes doing nothing is definitely the way.
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