One of the biggest mistakes that people make is deciding to invest in a few assets/investments and then, after that, figure out what their strategy looks like. Worse still, many financial services and property businesses do this too. They market investments that initially appear attractive but ultimately won’t help you achieve your goals. I outline why this is a very bad approach and what to do instead.
Sexy investments sell
The most successful way to sell investments is to market them using the two primary emotions of fear or greed. An investment that promises high returns with little risk will typically have great appeal to the mass-market. The problem is that sexiness and fundamentals are almost always inversely related. Fundamentally sound investments are usually dry, dull and boring. Therefore, it is difficult to get people excited about them. However, shiny objects attract a whole lot more attention.
The fastest way for a financial services business to attract more investors is to market sexy investments. The problem with this approach is that whilst it might deliver short term profit (to the business – probably not the investor), it is at the costly expense of creating long term value for both the business and the investor.
Be sceptical of businesses that market investments
No one trusts used-car salespeople. The reason is that we are well aware that their goal is to make a sale and they might say or do anything to achieve that goal. Its not that they are the enemy or bad people. It’s just that we have a very healthy level of scepticism for anything they say or do.
The same is true for any financial services business that markets investments. Their goal is to highlight the benefit of their investments and pitch to you why it is perfect for you. Therefore, you must maintain a healthy level of scepticism. If you want to find someone you can trust, find someone that has nothing to sell you (other than their advice).
Here are two different examples of what I’m talking about:
§ Because borrowing capacity has tightened, some property advisors are now recommending their clients invest in regional locations – because they no longer have the borrowing capacity to invest in blue-chip locations. However, these same businesses have in the past communicated that regional locations have inferior investment prospects. It is clear to me that businesses like these are designing their advice to fit their client base. Instead, I believe that you must
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IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.
