“Every investor is different, and for this reason their approach to investing varies,” Mr Harvey says. “We should all look at our decision making process and our psychology as it will have an impact on our success. Investors can change their psychology. People think they’re stuck in a rut, but they can definitely change. Your mindset with investing is everything.”
The Investor Scale
1 – The Procrastinator
If you find yourself making excuses, such as “I don’t have enough money” or “I don’t have enough time”, you may well fall into this category. Similarly, overly focusing on negatives, such as the market downturn, or the possibility of losing your job due to the nature of the economy, are also traits of the procrastinator.
2 – The Conservative Plotter
These people invest “on the side”. They might do a course or two, and look to dabble in property. These investors tend to manage to buy one property, possibly two, and then they find themselves stuck, or back at stage one.
3 – The Proactive Investor
This is the ultimate type of investor. They have a plan in place, clear goals and are mindful of their financial situation. They form the balance between stage one and stage five. All investors should aim to be in this category.
4 – The Optimistic Investor
These investors are keen to do the right thing, but often find themselves skimping on the due diligence as they have a bit of blind faith their investments will do well. Investors in this bracket may need to miss out on a better opportunity to be able to curb unfounded optimism.
5 – The Go-Getter
They often run ahead of themselves without doing the proper research and taking the time to learn. They may find themselves, or have found themselves, buying the wrong kind of property.
“If you believe you’re going to buy a dud investment, you probably will because your brain waves are attuned to buying a dud investment,” says Mr Harvey. “If you’re attuned to a great investment, looking for good numbers and good advice, then you’ll do well. You need to do your numbers, analyse your budget well, and then execute.”
Getting attuned to your own mindset can be difficult. Watching how successful investors work is one step, while seeking out mentor and networking are powerful considerations.
“Your parental influence and your peers have a big impact on your psychology as an investor,” he says. “If an investor runs off in their own direction without testing or measuring what they’re trying to achieve, they won’t achieve it. Get independent advice and test that advice.”
“Sometimes asking someone who knows a lot about your subject, such as a more experienced investor, can help.”
Jennifer Duke, Smart Property Investment, March 2013 issue