Tips For Growing a Property Investment Portfolio

Property investors who are new to investing often wonder how those property investors who have been around a while grow their investment portfolios so fast. Stories are always appearing about people who own a large number of properties and investors with one or two wonder how on earth that can come about.

It really isn’t any different than the very first step of using equity in an existing property for the deposit on another. How investors can rapidly grow their portfolio is by the fact that they have a number of investment properties to work with.

How it works.

Say for example, you have substantial equity in your current home and start your investing using the equity in the home to purchase your first investment asset. As your home and your investment property increase in value, you will have enough equity to purchase your third investment, but gained from two properties. As the number of properties owned increases, the quicker you build equity and therefore the quicker you can purchase multiple real estate assets.

1 property @ $300,000 X 10% = $30,000

4 properties @ $300,000 = $1,200,000 X 10% = $120,000

6 properties @ $300,000 = $1,800,000 X 10% = $180,000

It was not so long ago that real estate was increasing at over 10% a year.

You can see how property equity increases dramatically with a multiple number of properties and how equity quickly accumulates to purchase the next one. This is the strategy that investors use to grow their investment portfolios so quickly. You often read about people who have over 20 properties and this is the strategy that is used. Investors don’t get into that situation over night and it does take time to build a strong portfolio from their initial investment, but once there are a few properties in the portfolio it can explode overnight given the right circumstances.

Of course there are a lot of other considerations too with loans and repayments that need to be taken into account.

Should a property investor intend to live off the proceeds of his investments, then a property investment strategy needs to be put in place to cover that. It could mean that an investor will put a hold on buying for a bit and manipulate the portfolio into a positive situation or the investor may sell a property or two to decrease the loan repayments.

Good times usually follow bad times and it is expected that the property market will recover over the next few years. Loan monies may be harder to get for multiple properties but all these factors can be addressed as a property investment portfolio is grown. Keep aware of what is happening in the property market and in the finance world so that you are ready to reap the rewards when the time is right.

Disposition Effects Can Teach Us Three Lessons to Trade Successfully

Two pioneers in the field of behavioral finance, Amos Tversky and Daniel Kahneman, studied the decision making of individuals under uncertainty. One of Tversky and Kahneman’s many conclusions was that investors have an aversion to risk and an inability to realize losses. Hersh Shefrin and Meir Statman used these theories to explain what they called the disposition effect.

What is the disposition effect and what can be learned from it? The disposition effect, quite simply, describes how traders will quickly sell their winners but will hold on to their losers. The disposition effect also helps to explain why individual investors and traders have difficulty succeeding.

The inability to sell losers is cancerous to trading performance. Huge losses that come about from the inability to sell a loser are like digging a deep hole for yourself. The longer you hold a losing trade, the deeper and harder it will be to get out of that hole. The first lesson a trader can gain from the disposition effect is to use Stops. Stops will help make your losses more manageable which, in turn, will give you a chance to make back your losses. I use two types of stops, a Price Stop and a Time Stop. These Stops are my defense against “hole digging.” If the price goes against me, I exit the trade at a pre-determined, hard stop, point. In addition, if the trade has not reached my objective within a certain amount of time, I also will exit the trade. Both of these stops are not mental stops. They are real orders entered into the system. Using Price and Time Stops is the most important lesson that can be learned from the disposition effect.

The second lesson that can be learned from the disposition effect is to leave your ego out of trading. A big ego will contribute to the depth of the hole you are digging. Keep it out of your trading if you really want to succeed. You must come to terms with yourself and understand that it is okay to be wrong on a trade. You must learn this. Trading has a way of making you humble very quickly. The market will usually make you humble the first time you look up from the bottom of that hole you just dug and are viewing the sunlight of being even. Do yourself, and maybe others, a favor, GET RID OF YOUR EGO. It is only then that you stand a chance of succeeding in trading.

The third lesson that traders and investors can gain from understanding the disposition effect is to have patience. Most people have difficulty being patient, but it is, in my opinion, critical to trading success. Although I am a short time frame day trader, I still am very patient in waiting for my trade setups. I also use patience to allow my trade to reach my price objective. I give my trades time to work out. You will significantly improve your chances of trading successfully if you really understand these three lessons. Smart people learn from the mistakes of others.

Considering Some of the Advantages of Budgeting for Your Retirement

However, budgeting doesn’t have to be the pain that you imagine; overall it can even be a rewarding and beneficial experience.

So here are some great reasons why you should consider a budget.

1) Firstly, a budget can help to reduce personal stress levels. The main reason worry about money is because they don’t follow what money is coming in and what is going out. But making a budget can help you to avert stress because you will have a clear indication of what is happening with your money. It can also give you a clear view of your current financial position and where you want to aim for in the future.

2) Next, a budget can be time saving. Creating a budget if you are self employed will enable you to track your cash flow ahead of your end of year self-assessment. Due to this, you won’t need as much time to calculate how much money you have in the bank and how much you need to set aside for the government. And if you use a spreadsheet to record your finances then you won’t need to do much more than type in a few numbers.

3) You can easily save some money. By simply keeping an eye on your expenses and income and controlling how much you spend on variable expenses, you will probably find that you’ve saved more money than you thought. So, with your extra money, you can set up a savings account or set aside some of your excess money to do something fun- like a holiday or that new restaurant you’ve been wanting to try. Just think, is there something you’ve wanted for some time but couldn’t afford? Well, if you budget you might be able to buy it.

4) A budget means you can make quick decisions. An efficient budget makes it easy for you to make spending and investment decisions with confidence, as you can just check the spreadsheet and see your available funds. With a decent budget in place, you know exactly where you stand and your investment decisions can be made with the right information at your disposal.

5) Budgets can help you to plan for the future with ease and confidence. You will be able to plan how much to save for retirement and whether your budget has room to invest in a Fixed Rate ISA. A budget gives you the choice and confidence to plan ahead because you know exactly how much money you have to work with right now.

If you follow a budget you can have access to all of these pros and due to this you should feel a lot more confident about your cash.