Trends change in real estate all the time. Some are short term fads. Others are more permanent. Real estate and economic cycles are constantly turning. Failing to adapt is a fatal flaw that will crush even the wealthiest individuals and biggest institutions. Yet, there are timeless principles that prove equally fatal whenever investors veer away from them.
Here are four of them.
- Diversify Wisely
Diversification is essential to wealth preservation, growth and other financial needs and objectives. Just diversifying for diversification’s sake though, can be almost as harmful as putting all of your eggs in one basket.
Intelligent diversification has purpose. It is done consciously and with intent to simultaneously achieve multiple financial goals.
Make sure you are diversified, but also know why, and what you are investing in for those purposes.
- Don’t Lose Money
This doesn’t mean you won’t ever lose a dollar on your journey, at least temporarily on paper. However, this should always be front of mind. Not to the extent that it holds you back, but so that you are prioritizing the return of your capital, before the return on it. At least for a solid percentage of your portfolio allocation.
If you lose capital you can’t reinvest it. As long as you get your capital back, you can grow it again.
It’s also worth noting that idle capital is typically losing money, versus having it invested.
- Expect Volatility, And Profit From It
As highlighted at the beginning of this post, everything is always changing.
Sometimes it changes fast. During other periods it is slow. It is always changing though.
It’s like the ocean. It may look like it is just sitting there. Yet, it is always moving. The tide is coming in and out. There are ripples and currents in different locations. Sometimes the waves are huge and the surfers rush to the beach. Other times the water seems calm. Sometimes the water is crystal clear. In other moments it is very murky and hard to see what is happening under the surface.
You can’t fear or panic at the thought of change. You can’t ignore the importance of water when it is calm and less exciting.
Volatility is happening. The only choice is to anticipate it, and position yourself to benefit from it.
- Failing To Plan Is Planning To Fail
If you don’t have an immediate and long term financial plan, you are destined to fail. It may burn to hear that, but it’s going to sting a lot worse if you don’t embrace that and do something about it.
You can’t just invest like the average person and expect above average results. You can hope to have a wonderful financial future and lifestyle if you aren’t intentionally planning for it and taking the right daily actions now.
If you don’t have one yet, do nothing else until you have a financial plan.
What Are Your Investment Principles?
I just finished up a new book on intelligent diversification, called The Guide to Diversifying Within Real Estate, which many will find eye opening. There is a lot more to smart diversification than you may think. So, I encourage you to check it out.
My newest follow up book, The Timeless Principles of Investing in Real Estate, is one of the other most important investment principles that cannot be neglected if you want to become wealthy and avoid losing it all.
If you have some solid investment rules you live by, I’d love to hear what they are. Or let me know some that you are questioning and want debunked or proven.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund