The Negative Results Of Short-Sighted Investing: Buy High And Sell Low
The stock market is not my expertise, but there are at least some lessons that can be learned from Wall Street and then applied to real estate investing. Take for example the question of “When’s the right time to buy and when’s the right time to sell?” The answer is simple and has been heard many times by the average person, investor or not: “Buy low, sell high.” The more difficult part of this equation is recognizing when something is being sold under value and/or factors that will cause the value of the stock (or whatever other investment) to increase.
If you are able to make this analysis correctly and consistently, you will make money. It is my argument, and that of thousands of real estate investors, that it is very difficult for the average person to make good evaluations of stocks consistently over time due to the intricacies of the factors that determine their worth.
But, if people want to invest successfully in stocks, what can they do? Well, one can buy shares of historically successful companies like Coca-Cola, Wal-Mart, and Gillette, just to name a few, that are very likely to have continued success (these are called Blue Chip Stocks and have slower but steady gains or would you go back to the past and buy stocks at Wal-Mart’s IPO (Initial Public Offering, when you can first buy stocks in a company)?
If you say travel back in time to buy, you’re wise (and you’d be a multi-millionaire)! No one could have ever guaranteed during Wal-Mart’s beginnings that it would be so successful, but some speculated that it would be and are probably very happy to have done so; but can the average person do that consistently? Again, I say, it’s not easy for the average individual to analyze such complex factors to speculate successfully with the stock market; if it were, everyone would be rich!
So what do most people actually do? I would say the average stock market investor ends up buying what other people claim to be the current great investment. The problem is this: if it’s already being publicized as the “new hot thing”, you’re too late! The big gains have already been made by those who bought up the stock BEFORE it reached its current value that gains all the attention. By the time you’re buying, the people who got in early are probably thinking about selling……to you!
OK, OK, ENOUGH about the stocks; how does all this relate to real estate?!! People like to do what other people are already having success at, that’s what feels comfortable. Just like the stocks, however, this causes you to be well behind the game. You will end up with a “BUY HIGH, SELL LOW” mindset, exactly the opposite of what you should be doing! It’s mentally difficult to do what other people are advertising as bad investments and there is no better example of this than right now. The focus of news programs, politicians, newspapers, and even the average person, is how BAD the housing market is!
That’s funny because just a few years ago real estate was the talk of the town for how GOOD it was as housing prices soared to record-high (albeit unsustainable) levels. Many fell into the trap of buying when the market had already reached its peak and are now attempting to sell when the market is at its bottom. Guess who all the negative publicity comes from! As a successful investor in real estate, don’t look at the present, look at the future, and get on track for a “BUY LOW, SELL HIGH” strategy.
Additionally, it should be no surprise to anyone that there are ups and downs in the real estate market; it has always done this and it always will! Many successful investors don’t even worry about the roller coaster ride because they invest for LONG-TERM GAINS, which will glide right through the ups and downs. The great part is that compared to investing in stocks, it is MUCH easier for the average person to become educated and skilled at real estate. You have to work hard, you have to be persistent, and you have to build up a team of experts around you.
But instead of analyzing a paper coupon whose value is influenced by thousands of factors, you are analyzing a closely-held tangible investment (the property itself) that in the long-run is influenced by only a dozen or so factors. So instead of listening to all the current hype about how bad the housing market is, think for the future! BUY LOW, SELL HIGH! NOW is a perfect time to start the process!
