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Andrew Bell’s Market Wrap: Great Lessons for Investors

ByAndrew Bell

Issue 17 |  August 15th | Great Lessons for Investors

Hi Andrew Bell here and coming to you from a spectacular Gold Coast.

I have some really interesting information to share with you today as we come from 31 Southern Cross Drive here in Surfers Paradise, on the famous Cronin Island – a small island which is very exclusive and right in the heart of the city. The location boasts enviable water views overlooking Surfers Paradise and Main Beach skylines,  and the home itself is a brand-new architecturally designed luxury residence with 5-bedrooms and so many magnificent features ranging from ten-foot-high ceilings to covered alfresco dining areas to the oversized master bedroom with his and her walk-in robes, and much much more.

I am sure you agree it is quite amazing with its prized position water-frontage to the Nerang River, spectacular views, and the best of everything right throughout the home. You will never truly appreciate it unless you come and have a look for yourself. For more information contact the marketing agent Jackson Paradise on 0402 692 544 or j.paradise@rwsp.net. Jackson will be more than delighted to let you know of open home times or to arrange a private inspection.

There is no question that people are querying what to do with their savings and their investment monies. With interest rates at record lows, leaving your money in the bank is no longer relevant. The stock market is all over the place and with trade wars on, the volatility is enormous; which does keep steering people back to the tried and tested investment vehicle of real estate. Whilst it does have cycles and volatility at times, it has always proved through the test of time to deliver the best results for Australians.

I was interested to see Dr Shane Oliver, Head of Investment Strategy and Chief Economics at AMP Capital, and one of Australias most renowned economists, share some observations around investment markets over the past 35 years. He put together nine important things he has learnt over those 35 years.

Number 1: There is always a cycle. It is just how it is and how it has always been and you have to be aware of it whether you are buying or selling.

Number 2: The crowd gets it wrong at extremes. The markets get magnified by bouts of investor irrationality. The point of maximum opportunity is when the crowd is pessimistic, and the point of maximum risk is when the crowd is euphoric.

Number 3: What you pay for an investment matters a lot. In other words, the cheaper you buy an asset the higher its prospect of return. Many people don’t realize the profit is always in the price you pay, not the price you sell.

Number 4: Getting markets right is not as easy as one would think. There are two kinds of forecasters, 1) those who don’t know, and 2) those who don’t know they don’t know. The problem for ordinary investors is that is not getting easier because the world is getting noisier as the flow of information and opinion has turned from a trickle to a flood and the negative people have had to yell even louder to get heard. They love to dominate.

Number 5: Investment markets don’t learn. Dr Oliver’s observations are that investment markets don’t seem to learn. They make the same mistakes repeatedly, over and over, as markets lurch from one extreme to another. Whilst some people do learn from past experiences, there is always a fresh stream of newcomers to markets, and, in time, collective memories dim.

Number 6: Compound interest is like magic. He talks about the impact of compounding at a higher long-term return over long periods of time, and that evidence over 119 years suggests there is magic in compounding higher returns.

Number 7: It pays to be optimistic. He says to be an investor you must be a believer in a better tomorrow. He suggests you don’t get too hung up worrying about the next two or three years in 10 that markets may fall, and, in doing so, missing out on the seven or eight years out of 10 when the markets rise.

Number 8: Keep it simple stupid. He says it is best to keep your investment simple, don’t fret the small stuff, keep gearing manageable, and don’t invest in products you don’t understand.

Number 9: You need to know yourself to succeed in investing. Dr Oliver suggests we all have psychological weaknesses but smart investors are aware of them and seek to manage them. He suggests one way to do this is to take a long term approach to investing. This certainly takes away the need to be all over your investment on a daily basis trying to pick all the trends and react to them spontaneously. Knowing that markets do rise and fall, a long term investment rides through all of that.

He had a couple of other suggestions, such as: Don’t get thrown off by the cycles but look for the opportunities in them, don’t put all your eggs in one basket but diversify, turn down the noise – in other words, don’t read every single article or hear every commentary because it gets so confusing, don’t get suckered into the euphoria or the doom and gloom around assets, and, finally, seek advice.

I must say on that last point, during my 40+ year career in real estate I have always valued being a trusted advisor to so many people in the space of real estate. It has been a privilege to help so many people grow their investment portfolios and create true wealth for themselves and their families, and we will continue to do that as we press through these very volatile times we live in and through the ever-changing aspects that drive the real estate market. I trust you do find these fortnightly reports beneficial and I thank so many people, particularly during this year, who have expressed their appreciation for the information provided.

We are just four weeks out from this year’s Ray White Surfers Paradise Muscular Dystrophy Ball and I really encourage those who are talking about taking a table, to actually do it. Four weeks go by so quickly and I would hate you to miss out because of a lack of forward planning. It will be a great night.

For more information visit the website or contact Selena Carson (s.carson@rwsp.net or 0410 650 185)

A couple of weeks until spring and we are all set and ready to go for what is always a very busy selling season in the Australian real estate market.

Until I am with you in a fortnights time, stay safe and look after one another.

Kind regards,

Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group

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