No one likes to admit they’re wrong.
That they made a mistake.
That they may have been “sold” into something which hasn’t worked out as planned.
It’s an ego thing: Admitting that you’re wrong, especially in buying the wrong investment is bloody hard to do.
Taking corrective action is even harder.
Part of our role as Mortgage Broker is to relate the successes and failures of our 5000+ Client base to our other Members so they can learn.
Remember, very little of what you’re going to do in life is being done for the first time, unless you’re like, say, Einstein.
Use the mistakes of others to learn and prosper.
Earlier this week a young dude, about my age told me he had purchased a couple of apartments in Melbourne (in the wrong part of town) and QLD (in the wrong part of QLD) and was having a very tough time of it. He’d owned them for 10 years and they are worth what he paid for them.
He was having an even tougher time deciding whether to sell them or not. If he doesn’t sell, he will be stuck for years to come. Who knows how long.
Without selling them, he cannot borrow any more. He can’t invest again. He can’t right his wrongs. He can’t even refinance and restructure his home loan to make it easier to handle the debt and costs.
His gripe – and it’s valid – is that he will make a loss. But deep down, he also must admit he was wrong.
Here’s the thing: without selling them, he is wasting his most precious asset – time. It’s not the dough. It’s the time cost; or in economics 101 speak, the “opportunity cost”.
He’s going to miss out on the chance to learn from his mistakes and try again with a more rewarding outcome.
Geoff Wilson of Wilson Asset Management, Steve Schwarzman, founder of Blackstone (the World’s largest asset manager and worth US$38bn personally), and of course, the wise old men and crypto-haters Warren Buffet and Charlie Munger (who are usually always right and who’s net worth grew while the tech and crypto fools’ fell) preach this mantra: the first rule of investing is “don’t lose money”.
The second rule is “don’t forget the first rule”.
They would also quickly add, “time is your most valuable asset”.
If you’re doing anything in business, you’re going to lose some of the time (believe me, I know) but you have to disconnect yourself from the emotions surrounding your mistake and move on decisively and promptly.
If you’re holding onto a dog of an investment, especially if it’s been a dog for a while, you’ve got to make the call to sell, OR, shut up complaining and accept you are going to be wasting precious time and missed opportunity while you lament your failure and bruised ego.
Making a loss isn’t all bad – ask your accountant before you sell if you can offset the loss against a future gain and reduce the taxes the ATO loves to levy on hard working, risk-taking people like us.
As an Adviser, I can help you work through your emotions to reach the decision whether you should sell or hold.
Usually, there’s more to it than not getting the result you hoped for, and usually, there are ways to offset the losses to make the decision more strategic, unemotional and pragmatic.
If you flip this discussion around, when you make a big gain on an investment, to realise that gain, you must pay taxes and the same misguided emotionally-based decision-making process is what too many people use to guide them.
Or “what if”, or FOMO or some other primary-school-level decision making process.
I’ve seen countless people ride the wave up, then ‘hold on’ because they don’t want to pay the tax on the gain, or think there’s more to go, then suffer when the market comes off and they’re back where they started.
That’s as dumb as not selling. Probably dumber.
I’m here to help you talk through a conundrum (I’ll tell you if there’s going to be a fee to pay) to help you reach a more rational and pragmatic decision.
As always, we’re a hundred miles an hour and have limited spots but we are keen as ever to help you get ahead.
Book a complimentary 10-min call with me here.
Brodie Brown
Professional Mortgage Broker