What can we do as investors to negotiate our way through the plentiful global economic information we are presented with daily and not let a repeat of history dramatically affect our portfolio? Here are some tips:
As investors, we must diversify our portfolio over several different investment sectors. If investing in real estate, holding property of all the same type in one area will leave you open to having your entire portfolio affected by one event. For example, if you were holding inner city apartments in the United Kingdom during the 2008 global economic crisis, you would have lost half your equity and in most cases been left with empty properties. I personally hold investments in property in multiple countries, currency trading platforms, and share offerings through overseas investment companies. Even my companies diversify their interests over several securities and sectors.
2. Multiple value generators
Something we learned early on with our investment company is to make sure the products and properties we, and in turn our members invest in are powered by more than one factor, meaning every investment has something specific to that opportunity that generates a value for that investment. It could be a hotel which has both tourism and transient workers as its main custom or an residential property in an area which has housing for an influx of people in the area due to an increase in labor, but is also close to an up and coming, trendy place to live. Whatever the product is, and no matter the sector it is in, there should be more than one reason for why it will flourish.
3. Media studies
As investors, we must be more vigilant than the next man when it comes to the information we procure. For example, if you have beliefs or opinions about a certain economic outlook of a sector or nation, you need to not just read the publications or watch the videos which feed your beliefs. It is important to take information from many different sources. If you do not understand something, then consider and research it in more detail and learn. Like your portfolio, you must diversify your knowledgebase.
I constantly learn daily and there isn’t a soul in this world that knows everything. Seeing information from different sources is important. This is something that is much easier now with the birth of smart phones and the vast array of sources on the Internet. You can download news and information apps from around the world and I would encourage you to do this. It is very interesting to see the same story covered from different points of view, depending on the outlet or country. Take a moment to understand the long and short term economic effects of such incidents.
4. Standing Fast
This is one of the tips I believe in the most. Do not be a sheep in the investment world. Look at the current trends and understand that most trends occur due to lack of confidence and fear. If you can stand fast with your investment and weather the storm you will see a profit rather than negating a loss. Be prepared to take risks.
You may find that separating your capital between safer and more risky investment capital gives you the ability to make decisions which are more instinctive and less toward following the crowd. For example, people who held on to their properties during the 2008 economic financial crisis are now reaping the benefits, as they have paid very low rates over the last eight years and are now selling for a small profit. Compared that to the many that sold at half of what they paid out of fear or circumstance and you can understand my point.
The last time Gold prices tumbled people were quick to sell, but it was those who instead bought during this period or held on to what they had that saw a longer-term gain. Now we are seeing the same trend again; watch as people sell out of gold due to fear and lack of knowledge. As a commodity, which has had an overall upward trend through the tests of time, gold will rise again during its next upward trend and the people who stood fast will secure longer term gain. The people who continue to buy gold when the prices drop will see larger gains on a longer-term basis.
These strategies are by no means a concluded list and there are many other factors to consider. We must also remember that there are exceptions to every rule and the risks you take won’t always work out for you. And in fact, we have a saying in our companies – “If you are not earning, you are learning.” So when something doesn’t go our way we learn as much from it as possible, don’t allow it to scar our drive to succeed, and put procedures in place to make sure it doesn’t happen again. This is the best bit of advice I can give any investor.
Simon Calton is Co-Founder and Chief Executive Officer of Carlton James (www.carltonjamesgroup.com), an investment firm that specializes in hospitality, property and technology.