It’s often said that the devil is in the details. But for investors, attention to some things that may not seem so significant can make a big difference in long-term returns.
That’s the topic of a recent article and infographic from Visual Capitalist, which points out how very small tweaks to an investor’s mindset and strategies can yield more wealth. And it’s also what Jason Hartman has been saying all along: Invest early. Diversify your portfolio. Minimize risks. Keep expenses down.
Though these four simple keys apply to investors of all kinds, they’re especially relevant in the world of real estate, where it’s all too easy to fall into believing myths about investing or get swept away by enticing deals and promises of big money fast.
It’s commonly believed that investing is something done later in life, not an option for the young, or for those who don’t have a lot of resources ready to hand. But waiting to begin your investing career until you’re “old enough” or prepared enough can mean that you never begin investing at all. And since income property is an asset that increases wealth over time, investing early may be the bet way to lay a foundation for long-term wealth.
Investing early might mean setting your investing plan in motion at a young age by establishing good credit, setting aside money to cover investment related expenses and learning all you can about the process. Or it can mean taking that first step toward buying your initial investment property once you’re financially able to do so, rather than waiting for that next promotion at work, or the date of your retirement.
Diversifying your investment portfolio may not be a small thing, but putting the idea into your investing plan just might be. It may be tempting to put all your investing eggs into just one asset basket, but that can be risky if market conditions change.
It’s smarter to be open to buying properties in as many different markets as possible as a hedge against precisely that – being an “area agnostic” as Jason Hartman calls it: one who isn’t blindly attached to any one market but is open to promising investments wherever they might be.
Not only does a diverse portfolio offer a safety net in the event of a sudden crash, it also creates opportunities that wouldn’t necessarily be available in just one area: different tenant pools and economic conditions allow investors to rep profits in very different ways.
“Risk” doesn’t mean the same thing to everyone, and some investors are more risk accepting, or risk-averse, than others. There’s risk involved in every investment, of course. But investing success depends on avoiding needless risks and doing what you can to minimize the risks you do face.
Educating yourself is a basic way to do that – and it helps you stay in control of your investments. One needless risk many investors take is to leave their investing efforts to other people. While it’s important to get good advice from qualified people, the more you know, the better you’re able to evaluate that advice – and decide if those offering it are competent and honest.
Keeping the dollar signs out of your eyes is another way to minimize risk. Get rich quick promises and deals you must jump on immediately may be enticing but they carry great risks. Evaluating your tolerance for risk is something every investor should do – and so is resolving to avoid needless risks.
Keeping your expenses down is also key to investing success. Leveraging the power of debt is one way to do that. Using up all your savings to buy an “investment” property can end up being costly. Buying your investment properties with a fixed rate mortgage that’s covered by monthly rent payments reduces your risk and makes your own savings available for other uses.
Paying attention to other ways to cut expenses can also help boost your investing returns. Managing investments directly rather than paying management companies or property managers can keep money in your pocket – and so can getting multiple estimates for repair and maintenance work. Being mindful of ways to cut expenses is a small action that can boost investing returns.
Successful investors build wealth by taking both a long and a short view of the process. Some things may be out of your control – but the little things that make a difference are ones that any investor can do. (Featured mage: Flickr/wonderlane)
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The Jason Hartman Team