You might have thought of investing in property, shares or even in art, but have you considered investing in … cows? Have you been compelled to take out debts on debts? Fox and Hare’s financial advisers shared the worst investment decisions they have witnessed and gave advice on how to avoid them:
For Jessica Brady and Glen Hare of Fox and Hare, one of the most unforgettable clients they have had is someone who has invested in cows prior to seeking their services.
While cows could be a great investment in areas with expansive farms or a growing dairy production industry, this cow investment has not been thought through well enough.
“I think they went to some sort of event where there was free wine. Be careful of free wine and free advice events,” Ms Brady said.
Without proper education and preparation, the same mistake could easily happen to property investors, according to her.
A number of their clients have come down to a financial breakdown—taking out personal loans or maxing out credit cards to buy property or other assets for their portfolio—due to lack of financial management knowledge and skills.
Often, budding investors become so focused on acquiring assets that they forget what comes after the purchase—that is, maintenance and management of the asset.
Ms Brady shared: “Some clients take out personal loans, max credit cards to buy property without really thinking about what happens once you've got the property.”
“I've seen this done a few times, then when they've got the property, they think, ‘Holy Julie, I've now got this huge amount of money that's on a 20 per cent interest rate. Now what? It’s debt on debt. Clients come to us saying, ‘You need to help me get out of this.’
“Apart from the cows, that's probably one of the biggest mistakes we’ve seen. I would never advocate maxing credit cards or getting personal loans just to get a deposit.”
Ultimately, the best time to invest in property is when you can afford it. Having to take out loans or max out your credit card means it’s probably best to wait.
Apart from being aware of their financial standing, Mr Hare strongly encouraged investors to avoid emotionally driven investments.
“Whenever you're looking at any investment, when emotions come into it, I really would question the validity of that investment,” he highlighted.
While a diversified portfolio, with property, shares and even art or cars, could be lucrative at some point, the financial advisers urged investors to think about their financial standing, the existing and possible future market dynamics and their end goals.
Take time to educate yourself about the asset and the markets before ultimately diving into an investment.
After all, this could just be one of the biggest financial commitments you will make.
Mr Hare said: “We're massive advocates of diversification. We build the strategy with the client by showing them as many options as possible, which could enable them to achieve their goals.”
“It could be property, shares, managed funds, term deposits, or whatever is best for their case. Then we work out other elements such as their risk profile and the pros and cons of each strategy in order to determine which one strategy sits best with them.”
“It can be scary to watch markets go up and down and you may be compelled to buy into that emotionally, but if you know where you're going and you know what your time horizon is, you can make smart investment decisions and stick to the plan,” Ms Brady concluded.
Tune in to Jessica Brady and Glen Hare's episode on The Smart Property Investment Show to find out how to make smart investment decisions with the help of a reliable team of professionals.