When the property market is good it can be very good with some investors taking home enormous profits. Human nature dictates that fear and greed will rear their ugly heads at some point and they can potentially cloud your judgement in relation to your investments. If you remember that no investment trend will continue for ever and a day, the good times will not always roll on and you need to take a profit at some time you won’t go far wrong. Profit is only a profit once you have sold the asset!
Chasing the hot money
In theory chasing the hot money in any real estate market does have its risks but if you do your research and you are sensible there is money to be made. There is no point investing all of your funds into the latest hot money real estate market therefore a balanced approach with perhaps a relatively small amount of funds put aside for “more risky investments” may work. However, if you do chase the hot money in any real estate market not only do you need to know when to buy but perhaps more importantly you need to know when to sell.
The trend is your friend
This is a saying which is prominent in an array of investment markets around the world, the ability to follow the latest trends on the way up and then learn to see turning points. Sometimes these consolidation phases in a buoyant investment market can be short-term with prices potentially moving ahead yet again very quickly. However, there will come a time when a short-term trend, which may turn upwards again, could very quickly become a long-term down trend.
The reason I made so much money…………..
If there is one investor to follow it would be Lord Rothschild who had a famous saying which was “the reason I made so much money is because I always sold too early”. This is a saying which we have mentioned in earlier articles and while it may not make sense on first reading it makes great sense when you think about it. If you see a trend beginning to change, whether on the upside or the downside, you may decide to take action which turns out to be too quick and perhaps the wrong move. However, if a buoyant market begins to turn downwards for example then momentum will begin to grow and the sellers will flock to dispose of their assets.
This initial downturn can very quickly turn into a panic with short-term investors seeing their potential profits evaporate in front of their eyes. While markets often overreact on the upside they most certainly overreact on the downside with panic selling often forcing people to take crazy prices.
The key to any investment market, assuming you are in there for the long term, is to place part of your investment portfolio under a “balanced” strategy and perhaps leave a small amount for the more speculative investments which emerge. Some people do not even bother with speculative investments and tend to stay under the balanced umbrella. There is no right or wrong balance between a steady long-term investment portfolio and some of the more speculative options available because it simply comes down to personal choice, personal experience and what kind of risks you are looking to take.