{"id":3479,"date":"2015-02-24T01:00:32","date_gmt":"2015-02-23T14:00:32","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=3479"},"modified":"2015-02-24T01:00:32","modified_gmt":"2015-02-23T14:00:32","slug":"how-our-mind-sabotages-investment-success","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/how-our-mind-sabotages-investment-success\/","title":{"rendered":"How our mind sabotages investment success"},"content":{"rendered":"

 
\nOn today’s show\u00a0Michael Yardney<\/a>\u00a0<\/b>discusses that\u00a0as property investors we can sometimes be our own worst enemy?
\nIt\u2019s not because of the decisions we make, the opportunities we consider or the investments we miss out on, but rather, it\u2019s due to the way we\u00a0think<\/i>. It is\u00a0the way our brains sneakily convince us to make decisions that aren’t always in our best interests.<\/p>\n

Read the transcript here:<\/h4>\n

Kevin:<\/b>\u00a0\u00a0I\u2019m going to continue the series of Michael Yardney in the show today. Last week, we started talking about the psychology of success, and we went through a few biases, Michael, which really resonated with me quite remarkably. I\u2019m looking forward to seeing what we have today.
\nBefore we get into it again, just explain to us briefly what it\u2019s about.
\nMichael:<\/b>\u00a0 We tend to think we\u2019re rational human beings, however what I shared with you last week was that some of us are prone to what psychologists call cognitive biases that make us think and act irrationally. It affects our investment decisions because of these biases. We discussed a couple last week, and let\u2019s talk about a couple more today.
\nKevin:<\/b>\u00a0 Please do. Let\u2019s start.
\nMichael:<\/b>\u00a0 One of the things that we\u2019ve often spoken about on this show is that one should actually review the performance of your property portfolio. There\u2019s a bias psychologists talk about called awareness bias.
\nHow are your property investments going? Are you happy with the results you\u2019re getting? There\u2019s a chance that even if you\u2019re not doing so well, you may not even recognize it. In fact, it\u2019s been shown that the poorest performers in all arenas of life tend to be the least aware of their own incompetence.
\nPsychologists put a lovely name to it and call it the Dunning-Kruger effect. It means that you lack the capacity to see how you\u2019re performing yourself. I guess it\u2019s one of the reasons you actually need an outside mentor or somebody to help you, isn\u2019t it, Kevin?
\nKevin:<\/b>\u00a0 That\u2019s what I was going to suggest to you. That is the obvious solution \u2013 to have someone who is brutally honest with you and can point those things out to you.
\nMichael:<\/b>\u00a0 Exactly, because all of this is happening at an unconscious level, Kevin.
\nAnother bias we tend to have is positivity bias. Many people view residential real estate positively. They think it\u2019s a great asset class to grow their wealth, and they continue to do so even if their investments don\u2019t do too well.
\nIn face of lack of capital growth, I\u2019ve seen investors still say, \u201cIt\u2019s going to turn out\u00a0one day<\/i>.\u201d The problem with this is that when all the signs point to a dud investment, it\u2019s likely that it is one, but positivity bias stands in the way of an investor taking action to rectify the situation.
\nKevin:<\/b>\u00a0 It\u2019s very dangerous, Michael.
\nMichael:<\/b>\u00a0 It is, isn\u2019t it? You\u2019re actually losing your own money. Overconfidence is a real risk for property investors. One of the best things an investor can do is admit, \u201cI was wrong. It didn\u2019t work this time.\u201d
\nKevin:<\/b>\u00a0 You know, with positivity bias, if you are reviewing your portfolio, it could be a gross waste of time if you\u2019re not willing to accept that something is wrong.
\nMichael:<\/b>\u00a0 That\u2019s right, but we don\u2019t realize that we\u2019re all prone to little bits of this in various elements of our life, aren\u2019t we, Kevin?
\nKevin:<\/b>\u00a0 What about the opposite? Negativity bias?
\nMichael:<\/b>\u00a0 That happens too; you\u2019re right, Kevin. Just as some investors are overly positive, there\u2019s a tendency to put more emphasis on negative experiences in some people, rather than the positive.
\nPeople with this bias feel the bad is stronger than the good, and they perceive threats more than opportunities in a given situation. Psychologists actually argue that this is an evolutionary thing. It\u2019s better to mistake a rock for a bear, than a bear for a rock, they would say.
\nTo keep our ancestors alive Mother Nature evolved a brain that routinely tricked us into making three mistakes. It used to overestimate threats, it used to underestimate opportunities, and it underestimated our resources for dealing with threats and opportunities.
\nThis is a great way to pass on genes and to be genetically strong and have a bigger, stronger population, but it\u2019s a lousy way to promote the quality of life or grow your wealth.
\nKevin:<\/b>\u00a0 What\u2019s the difference between being negative and being conservative?
\nMichael:<\/b>\u00a0 The thing is that some people see the glass half full and others see the glass half empty. While the pessimists and optimists keep arguing about which way the market is going, the optimists are just going out and making money.
\nThe fact is we\u2019re always going to have pessimists around us telling us why not to invest and reminding you of all the things that can go wrong. But the reality is that real estate is a cyclical investment. You can minimize your risks and maximize your upside by educating yourself, becoming financially fluent, following a proven strategy, and getting a good team around you.
\nKevin:<\/b>\u00a0 Indeed, and what\u2019s the bottom line?
\nMichael:<\/b>\u00a0 We all want to think that we\u2019re rational and these biases are things that afflict other people, however our brains are designed with blind spots that tend to trick us and delude us. That\u2019s why so many of us are not only bad with money, but we tend to make the same mistakes over and over again.
\nWe\u2019re blind to our blindness, so we should at least be aware of it and work with other people who can see our blind spots. That\u2019s what a mentor does, Kevin.
\nKevin:<\/b>\u00a0 Wonderful stuff. Thank you so much, Michael, for taking us through the psychology of success. Michael Yardney is from Metropole Property Strategists.
\nThanks, mate.
\nMichael:<\/b>\u00a0 My pleasure, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  On today’s show\u00a0Michael Yardney\u00a0discusses that\u00a0as property investors we can sometimes be our own worst enemy? It\u2019s not because of the decisions we make, the opportunities we consider or the investments we miss out on, but rather, it\u2019s due to the way we\u00a0think. It is\u00a0the…<\/p>\n","protected":false},"author":176692471,"featured_media":3480,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,25],"tags":[70,101],"class_list":["post-3479","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-sponsored-channels","tag-featured","tag-podcast"],"yoast_head":"\nHow our mind sabotages investment success - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/how-our-mind-sabotages-investment-success\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How our mind sabotages investment success - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  On today’s show\u00a0Michael Yardney\u00a0discusses that\u00a0as property investors we can sometimes be our own worst enemy? 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