I was just reading an interesting article on variations on share returns and I'm sure the principle(if not the exact figures) would be VERY similar with property investment...........
The relevant bits of the Leeanne Bland article were as follows.........
"Picking the point at which markets finally turn is notoriously difficult, and history shows that if you miss the boat by even a few months, you miss a lot of the investment upside as well.
IPAC points to Ned Davis Research in the US, which found that in the 12 months after the end of a bear market fully invested share portfolios gave an average return of 38%.
If, however, an investor missed the first six months of recovery by holding cash, their return was reduced to 6.8%.
Mark Dutton, the chief investment officer at IPAC, says the problem is investors tend to get out of the markets at the worst possible time and into other asset classes at peak levels. The result is that many destroy, rather than enhance, their wealth.
Why then do we get out when we should be in, and get in when we should be out?
Dutton says it's all psychological. Researches say the pain that most of us feel from losing $1000 is about double the pleasure we feel from gaining $1000. This heightened anxiety often leads to emotional reactions. But this behaviour has a huge affect on the hip pocket nerve.
The damage it does to savings is enormous, says Dutton.
Dalbar Research in the US shows the average return for US shares over the 16 years to 2002 was 16.3%. Average investors got 5.3% a year. 'This is because they are moving in and out' he says."
Oh .........and for the number crunches out there.........I just did the math............
If you invested $10,000 for 10 years with a 5.3% annual return you'd wind up with about $16,800. Same money for the same period but with a 16.3% return would give you about $45,500 or a $28,700 difference on the original $10,000 invested.
Can't help but think this sort of thinking probably applies to most investment areas.........
The relevant bits of the Leeanne Bland article were as follows.........
"Picking the point at which markets finally turn is notoriously difficult, and history shows that if you miss the boat by even a few months, you miss a lot of the investment upside as well.
IPAC points to Ned Davis Research in the US, which found that in the 12 months after the end of a bear market fully invested share portfolios gave an average return of 38%.
If, however, an investor missed the first six months of recovery by holding cash, their return was reduced to 6.8%.
Mark Dutton, the chief investment officer at IPAC, says the problem is investors tend to get out of the markets at the worst possible time and into other asset classes at peak levels. The result is that many destroy, rather than enhance, their wealth.
Why then do we get out when we should be in, and get in when we should be out?
Dutton says it's all psychological. Researches say the pain that most of us feel from losing $1000 is about double the pleasure we feel from gaining $1000. This heightened anxiety often leads to emotional reactions. But this behaviour has a huge affect on the hip pocket nerve.
The damage it does to savings is enormous, says Dutton.
Dalbar Research in the US shows the average return for US shares over the 16 years to 2002 was 16.3%. Average investors got 5.3% a year. 'This is because they are moving in and out' he says."
Oh .........and for the number crunches out there.........I just did the math............
If you invested $10,000 for 10 years with a 5.3% annual return you'd wind up with about $16,800. Same money for the same period but with a 16.3% return would give you about $45,500 or a $28,700 difference on the original $10,000 invested.
Can't help but think this sort of thinking probably applies to most investment areas.........
