29 July 2009
Why do people invest?
We can't talk for others, but we know La Trobe investors aim to increase their personal wealth.
Wealth means different things to different people. Wealth may mean you can . . .
- Buy a house
- Upgrade your car
- Take an around-the-world holiday of a lifetime
- Retire earlier
- Buy a better house
- Buy a Ferrari or a yacht
- Start a business
- Install solar panels on the roof of your house
- Join the growing ranks of philanthropists
You get the picture. If we could sum it up in two words, they want 'flexibility' and 'choice'. Wealth gives you flexibility and choices.
But not all wealth is created equal. Some people inherit wealth. Some are career high-fliers, earning big business mega bucks. Some start, or some run their own successful businesses. Some make it in property. Some make it by simply saving as long and hard as they possibly can. Some get very, very lucky and win lotto.
If we were to simplify the great investing secrets, we'd suggest they could look
something like this:
Invest only with companies who have sustainable competitive advantages, managed by smart, passionate people.
Invest into those companies over a number of years.
Hold those investments for the long-term.
Simple? If the formula is so simple, why aren't there more investing billionaires? The answer may be that most investors don't follow simple investing
How to never lose money
When Warren Buffett speaks, the investing world listens. There are hundreds of classic Buffett investment quotes, most of them amazingly simple. One of our favourite Buffett quotes is . . .
"Rule No.1: Never lose money.
Rule No.2: Never forget rule No.1."
Unfortunately these rules are impossible to follow. Even the great Buffett himself has lost money. We've all had losing investments. It comes with the territory. If you were afraid of ever losing money, then investing is not for you. We all can, and will, make poor investment decisions over our lifetime.
Reducing risks - How to preserve your capital
There is only one word to describe the state of affairs in world wholesale financial markets right now. It's a four-letter word, so for those of you who don't like swearing, look away now. Until the second half of 2007, many people hadn't used this word since 2003. It had simply disappeared from their vocabulary. Forgotten . . . ignored . . . gone . . . But now it's back . . . RISK.
Believe it or not, when you invest you immediately take on a level of risk. Believe it or not, stocks can go down as well as up. Believe it or not, private equity is not a licence to print money. Believe it or not, the housing market can go down as well as up.
It would be easy for us to sit here and say that over the long-term, this financial markets crisis is likely to be totally insignificant. But that comment might be viewed as a bit flippant, given that some people have lost money already. No-one likes to lose money, and we don't like it when people lose money.
Amongst all this hype we think it is more important than ever to think rationally. Don't jump the gun. Don't let fear make you pull out
of good investments.
This sort of analysis is nothing new. Whatever the market conditions, when it comes to our loyal investors, we always maintain our time-tested rigorous approach, as summarised by our
Three Rules of Investing. They are:
- Never put all your eggs in one basket;
- Recognise higher returns equals higher risk; and
- Getting rich slowly will never go out of fashion.
> About Us
> PDS - Want to invest?
> Subscribe Free
> Independent Ratings
> Mortgage Shopping List
Head of Funds Management
t +61 3 8610 2811
Chris Andrews is the Head of Funds Management for the La Trobe Group and has responsibility for the La Trobe Australian Mortgage Fund.
Read full profile here.
La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 115 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.
Copyright 2010 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. Disclaimer