Andrew Stotz says the biggest mistakes he sees are investors who are poor risk managers and fail to do their own research.
The best way to navigate any hurdles and potential opportunities which arise in the property market is to get on top of your research.
This is the advice of award-winning financial analyst and author Andrew Stotz, who joined KnowHow founder Bushy Martin on the Get Invested podcast.
Andrew warned that investors who don’t conduct their own research, and only follow the opinions of others or the media headlines, will often fall into strife and make poor decisions due to a lack of understanding on what’s really happening in the market.
“I would say the number one mistake, which I really challenge everybody listening to not make, is investors failing to do their own research. The majority of the troubles that we get into in investing happen because we don’t take the time to research it. Something feels right, something feels good, you like what somebody says and then you jump into it. And so there is no substitute for research,” Andrew said.
“Then I think the other part to that is that research doesn’t have to be long and complicated. Research can be simple, you know, just searching around, trying to find information, that type of thing. So that is absolutely number one.
“And if I had one piece of advice, I would say just never invest in any investment that somebody tells you about without doing your own research. You’re going to get information and ideas from all around, but do your own research to that. And that’s going to help you a lot.”
Andrew expanded on this advice, explaining that increased knowledge enables a greater thinking process and allows for investors to have a mindset similar to a financial analyst.
“Let’s say I have a friend of mine who has got theories all the time. He’s like ‘the government is doing this, and this is happening, and interest rates are this and that’. Those are all theories, and they could all warrant research. But in the end, a financial analyst has to do the research and then put money down on the theory. And if your thinking process is poor, you’re going to lose money constantly on this … So I just want to train more and more people to think in a financial analyst sort of way, and in a structured way. You’ve really got to think about things carefully,” he said.
Having a sound education will also allow investors to better manage their risks, which Andrew said is the second biggest investment mistake that occurs.
“The other thing is people are very poor risk managers. And so the second most important thing is to properly assess and manage risk. And assess risk means going into something slowly if you can. And you might say, ‘well Andrew I can’t go in this slowly because it’s a huge property that I’m going to buy. It’s a huge amount of my wealth and it’s not like I can go in with $10,000, I’ve got to go in with all or nothing’. Well, right there is probably a problem, so you need to assess the risk of a project, but then you have to manage that risk,” he said.
Listen to the full interview here.
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