The Quality Investor

[duncan_m]

If you had to give a ranking to an investor or take a long look at your own position, what qualities would you look at? What things would you judge?

I think too often we focus on how many properties someone has, its such a hollow and pointless measure. There's surely a whole range of skills, attributes, qualities etc that we need to look to in order to get the Big Picture of someones success as an investor..?

I was considering the following list, but was curious what other people would add?


Risk Management,
Budgetting
Tax Management
Asset Protection
Financial Planning
Estate Planning
Record Keeping
Research skills
Investment Track Record
Personal Life Balances
Activeness in Educating the Willing
Integrity
Knowledge (reading etc)
Flexibility in approach

Dunc.

 

[Sim]

Interesting concept Dunc,

However I think it wouldn't work terribly well as a score of "how good" an investor is at what they do, because there is one item you forgot to add to your list...

- The ability to leverage the skills of other experts (eg accountants, solicitors, bookkeepers etc etc).

I'm halfway through reading "The Millionaire Mind" - one of your favourites I think Dunc - and one of the things that comes out clearly is how the successful millionaires do not try and do everything themselves - rather spend a lot of time with trusted advisors.

So my point is that the ability of an investor to implement such strategies as risk management, tax planning, asset protection, estate planning etc - are not so important, since it is the professional advisors who should be doing all the work for you.

However, if you are more looking for a grading of the completeness of an investor's strategies, more of a "check list" to ensure that they have the necessities covered, then I think you are on the right track.

 

[Elwood or Bust]

Discipline is a VERY important trait in all forms of investment I believe and its important at three stages, probably most important at the buying stage:

1/ Buying: Many people, including me once upon a time, are impulsive buyers. That is, we are great researchers in seeing what we want to see. A property could be a complete lemon but in our impatience, we see everything through rose tinted glasses. I still have this problem in shares but i definitely am disciplined when it comes to property investment, there is so much more to lose.

2/ Retaining an investment: How many people are thinking of selling their properties due to the current warnings of overheated property bubble. Probably bnot many on this forum as we are hardened property investors, but out there in the real world, people that jumped in for a quick buck are getting scared. If you are a long term investor you need to be disciplined to trust your own research, as those of others are usually flawed, not specific to your investment, or biased towards their own product offering.

3/ Selling: In this scenario, too many people believe their property is worth to much. Remember the value of a property is what the market will pay for it at that time. Yes it can be a bargain, but at that time that the agents gavel hits the hand, its fair value. Many people pass their properties in because they think they can get more. Of course if you dont need to sell, then thats fine, but if you are passing in because you think you can get more in next couple of weeks thru private sale, you could miss out. If you NEED to sell, you need discipline in this area to realise what the market is paying at the moment, regardless if its under your 'realistic' price.

PS Sorry if this double posted, i got an error msg first time.

 

[Aceyducey]

I'd rate the important skills as:

Honesty (particularly with yourself)
Integrity
Delegation
Relationship management
Sense of humour
Willingness to get your hands dirty/do boring tasks

Everything else can be picked up as you go along

Cheers,

Aceyducey

 

[WillG]

Great question - what qualities make a good investor ...

Clear well defined Goals
Ability to measure where he is in his strategy
Risk management strategies
Ability to recognise a good deal
Ability to always have enough equity to pounce in a good deal
Has good quality, trustworthy advisors at hand (sim has a similar point)
Always in touch with current economic climate(tax changes, property law, urban trends ...)
Ability to listen & learn from fellow investors
I believe these traits/skills must also be posessed by business owners

 

[Lily House]

Lets not kid ourselves. Whilst we might enjoy the journey, we invest to make $$$$$$$$.

Any measure of an investor would have to factor in this.

Lily

 

[Bill.L]

Hi all,

1/ Following the path of least resistance.

2/ Having a disciplined approach to risk management.

3/ Educate yourself in the area of your investment.

4/ Luck, but it is surprising how much luck comes to those who follow rules 1/,2/ and 3/.

bye

 

[geoffw]

I like #4.

I bought a property about 12 months ago which was cashflow +ve with good growth prospects. It was advertised in the paper- I didn't even respond until about the thirs week I saw it.

I have had the response from some investors since- "I saw that ad!"

 

[investor]

Originally posted by Aceyducey
I'd rate the important skills as:

Honesty (particularly with yourself)
Integrity
Delegation
Relationship management
Sense of humour
Willingness to get your hands dirty/do boring tasks

Everything else can be picked up as you go along

Cheers,

Aceyducey

Hi everybody

Actually aceyducey I'm going to have to disagree with you here. These qualities are good to have I don't disagree with that, but they are not important to becoming a successful investor. I agree with Lily House here.

We invest, develop, trade, wrap etc etc to make $$$$$$ there is no doubt about that.

The most successful investor is one that has gotten there the quickest, that has made the most $$$$$ legally but not always ethically, and therefore the one that used his skills whatever they be to get there.

In an interview with Andrew Denton, Rene Rivkin said " I will never become a Zillionaire, because to become a Zillionaire you have to trample on peoples heads" he then goes on to call Kerry Packer " the best business man I have ever met".

Therefore I believe the measure of the most successful investor is the one who has made the most $$$$$$$$ in the least amount of time with the smallest outlay and in some cases to this you have to be abit ruthless.

Regards

Investor

 

[Les]

G'day all,

It must come down to "What is the definition of success" - without that, we're at odds. If success is purely based on gaining the most $$$ in the shortest amount of time, legally but not ethically, then I don't want to be there.


Sorry, Investor - I can't go along with you on this one. If ethics are set to one side, then so am I. I want to be successful on MY terms - and if that means I won't be as rich as quickly, then so be it... In my eyes, I'll still be successful earning less, but ethically.....

Again, I guess that's personal opinion - but aren't all the posts based on that anyway?

Regards,

 

[Aceyducey]

Originally posted by investor
Hi everybody

Actually aceyducey I'm going to have to disagree with you here. These qualities are good to have I don't disagree with that, but they are not important to becoming a successful investor. I agree with Lily House here.

<SNIP>

Therefore I believe the measure of the most successful investor is the one who has made the most $$$$$$$$ in the least amount of time with the smallest outlay and in some cases to this you have to be abit ruthless.

Regards

Investor

Investor,

If your definition of a successful investor is someone who is ruthless & simply out to make as much money as possible in the shortest possible time, then I'm glad we don't agree

I intend to enjoy my life, be fair to others (ethical) & spread success as wide as possible (helping family & friends).

Ultimately I don't invest to earn money, but to create a lifestyle for my family.

Over the last seven years I worked in the Internet sector of IT and saw lots of greedy people rushing to make as many dollars as fast as they could using ruthless, unethical and sometimes downright illegal actions. None of them are people worth knowing. None give anything back to their families, friends & society. And none of them are really happy, they measure themselves by their dollars and when the dollars disappear, so do their friends & self-worth. It was an object lesson to me as to what is really important in life.

I'm with Les on this one, life is about more than money.

But Investor, I still hope you get what you want - even if it isn't what you expected when you get there

Cheers,

Aceyducey

 

[jahn]

investment

Les & aceyducey
Spot on. !
Without ethics, its not worth it.

duncan-m
I could be pedantic and answer your question about 'investing ' and rave on about the amount of time and effort I have put in on my family and say I have 'invested' plenty,

I am a real late starter as a property investor and am only going for number 3 IP, and not much cash flow yet, so would be lousy investor on most surveys. But hey.
1/ Still learning
2/ Still content
3/ Still happy
4/ Very satisfied
5/ NO guilt complex

OK duncan 6/ little bit jealous of the ‘young guns
jahn

 

[investor]

Originally posted by Aceyducey
Investor,

If your definition of a successful investor is someone who is ruthless & simply out to make as much money as possible in the shortest possible time, then I'm glad we don't agree

I intend to enjoy my life, be fair to others (ethical) & spread success as wide as possible (helping family & friends).

Ultimately I don't invest to earn money, but to create a lifestyle for my family.
Aceyducey

Hi Aceyducey, Les

Sorry Aceyducey and Les I agree ETHICS are important, but surely if you are investing in property, shares, business etc etc you are doing it to make money and therefore the most successful investor is the one who has made the most. What you do with the money afterwards ie. lifestyle, charity etc etc has nothing to do with how you got it in the first place.

However there are different levels of success and that depends on our goal as an investor. You may be happy with $100 or $200 a week and you may consider that when you have achieved that income stream that you are a success as an investor that is up to each individual, you may consider that you have now created the lifestyle you wanted for your family. But are you a successful investor ?

I consider Murdoch or Packer as succesful investors/business men and they didn't get there by being nice to everybody. There comes a time in investing where you have to have a mean streak inside of you otherwise you will not survive. There are times when you have to be ruthless to proceed to the next level. Now I don't mean you have to do anything illegal but unfortunately you will reach a level were there will be others out there who are going to try and trample on your head to get what they want, and they will, if you are always nice and all you have is a sense of humour.

If you are going to be a successful investor you are going to make some people unhappy, be it the builder you may take to court for not doing the job right or the tenant you are evicting for not being able to pay your rent. You cannot be nice, warm and fuzzy with everybody as you say. In investing you have to make the people you are dealing with understand that your word is final and when you say something you have to follow through and do it, it's the only way people will respect you, they may not like you but they will respect you.

You can still enjoy your life helping family and friends and create the lifestyle you want as you say but these things have nothing to do with becoming a successful investor. You can be mean, grumpy and have the worst sense of humour but you can still be a successful investor because of your ability to make money from property, shares, business etc etc.

Here we are talking about being a successful investor not about being a successful and loved member of the community who happens to own a couple of houses.

Reagrds

Investor

PS. I am not mean and grumpy and I have not trampled on any heads.

 

[Bill.L]

Hi all,

The concept of ethics/ruthlessness in investing is an interesting one. Consider the following,

You buy a nice looking painting at a garage sale for $10, hang it on the wall, and after a year or two someone visiting notices the painting and comments " isn't that Rembrandt's long lost ......" You take it to Sotherby's for auction and receive $10,000,000. After CGT, what do you do with the money? How much of it do you give to the person who originally sold it to you??? Does it matter to you if the original garage sale was in a Toorak mansion, or or a flat in Doveton?? Does the percentage you keep determine if you are ruthless/ethical ???

A different senario, You buy a rundown house in Williamstown for a cheap price from a "desperate vendor" in 1992 for $70,000. You spend $50,000 fixing/extending the place in 93. In 2003 you sell for $650,000. How much of your gain do you give to the original vendor who is struggling in a housing commission flat, and been that way for 11 years???
My belief is that just about all cap gains come at someone else's expense.( With shares you buy at $1 it goes to $20 you sell and it goes back to $1. You have 2 losers in this case.)

bye

 

[Andrew]

Good post Bill, I too have thought about this. I justify it to myself by supposing that the vendor was willing to trade future capital growth for cash at that point in time. If you have acted with integrity during the negotiations you cannot be hold yourself responsible for anothers expense at your gain.

andy

 

[Macca]

Bill,

The only time that I would feel uncomfortable would be if I knew that the painting was a Rembrandt when I bought it for $10.00.
If I bought it, took it home and the frame was full of woodworm and fell to bits, can I go and get my $10 back? I don't think so.

If I paid $60,000 for house, spent $100,000 reno, and then discovered the soil was contaminated or a coal mine is starting next door, will the vendor refund my $60k plus my $100k??
very unlikely I think.

We must act in accordance with our personal values, on the knowledge we have at that time. We do not have the right to tell other people what they should do with their life or property.

Every person of sane mind is responsible for their own actions, if they want to sell then we are actually complying with their wishes if we buy aren't we?

 

[XBenX]

Macca - im not sure if I read your post the way it was meant to read - so ignore my post if I misunderstood

But I would never feel bad about buying something valuable for a nominal price - if the vendor doesnt know the true value and accept the price you pay them... bad luck....thats the way a market works...failure of the free market system no1 - imperfect information leads to price distortion...its just a fact of life

 

[Aceyducey]

Originally posted by investor
Hi Aceyducey, Les

Sorry Aceyducey and Les I agree ETHICS are important, but surely if you are investing in property, shares, business etc etc you are doing it to make money and therefore the most successful investor is the one who has made the most. What you do with the money afterwards ie. lifestyle, charity etc etc has nothing to do with how you got it in the first place.

<SNIP>

Investor,

This sounds like standard Ends justifies the Mean stuff. Sorry Investor - it doesn't. You'll learn with more life experience.

Also the definition of MOST = BEST is totally fallacious.

MOST = MOST, nothing more

<SNIP>

There comes a time in investing where you have to have a mean streak inside of you otherwise you will not survive. There are times when you have to be ruthless to proceed to the next level. Now I don't mean you have to do anything illegal but unfortunately you will reach a level were there will be others out there who are going to try and trample on your head to get what they want, and they will, if you are always nice and all you have is a sense of humour.

<SNIP>

Investor,

You're drawing a very long bow here.

Assertive doesn't equal ruthless. You can look out for your own interests without being ruthless.

I don't know what your background & experience encompass, but after spending around seven years dealing with Boards, Venture Capitalists, CEOs and the like, founding & operating companies, I can assure you that the ruthless approach only works in the short-term & causes much more damage than good. The assertive approach, coupled with a good win-win philosophy works for the long-term.

I'm investing for the long-term, not the short term. In fact I do it full-time, so I must be doing something right.

<SNIP>

You cannot be nice, warm and fuzzy with everybody as you say. In investing you have to make the people you are dealing with understand that your word is final and when you say something you have to follow through and do it, it's the only way people will respect you, they may not like you but they will respect you.

<SNIP>

Again - don't confuse assertive with ruthless.

<SNIP>

You can still enjoy your life helping family and friends and create the lifestyle you want as you say but these things have nothing to do with becoming a successful investor. You can be mean, grumpy and have the worst sense of humour but you can still be a successful investor because of your ability to make money from property, shares, business etc etc.

Here we are talking about being a successful investor not about being a successful and loved member of the community who happens to own a couple of houses.

<SNIP>

So it all gets down to a definition debate - I regard successful investing as including being happy with myself and considerate of others, you don't.

Counting the dollars is fine, but they don't make a good bed to lie on.

(BTW: I'm enjoying the debate).

Cheers,

Aceyducey

 

[Jamie]

Originally posted by Aceyducey
Investor,

Ultimately I don't invest to earn money, but to create a lifestyle for my family.

Cheers,

Aceyducey

Hi Acey,

Without wading onto either side in this debate (I see the validity of both perspectives), arent you utilising a distinction you were loathe to allow investor to make himself?

My point is, you can't create the lifestyle you allude to without making money in the first place.

If you werent investing for money, how could you fund this lifestyle? Isnt the lifestyle afforded by successful investment a fundamental by-product of earning that money in the first place?

Just a thought,

Jamie

Im trying to avoid replying to the "end justifies the means" comment... my favourite book is Machiavelli's "The Prince"

 

[Aceyducey]

Jamie,

I've never said I'm not investing to make money

I'm saying that making the MOST money doesn't necessarily qualify you as the BEST investor or justify being ruthless just to earn a buck more than the 2nd wealthiest investor.

You need to have balance in your life & part of that is being able to sleep at night knowing that there is no-one out there who has been ruined by your decisions.

Here's a thought:
Most investors don't invest in cash.

Why is this if cash is the aim of investment?

It's because there are many things more valuable than cash - thus investing isn't simply about money, it's about what you do with it.

Cheers,

Aceyducey