Fear, or Greed?
It is generally accepted that there are essentially only two sources of
motivation; negative and positive. In investment terms, these are
manifested by fear (negative) and greed (positive). In order to
illustrate which one is more powerful, imagine you are either running a
race for a £1M prize or running to escape a rampaging Elephant. In
which scenario would you run faster?
 For
the majority of people, fear is a far greater motivator of activity
than anything else. Actually , only a relatively small percentage of
the population is significantly motivated by money/greed,
at least to the point where they will take significant action to get
it. In other words the price of success is too high for most people.
So, with fear as its core motivation, the prevailing
financial advice to all of us, in light of the current economic mess we
find ourselves in, is to reduce our borrowings, spend less, save more
and whatever else you do, avoid buying property. Is the last piece of
advice about property good advice? We do not think so and and hope to
counter the fear which is stopping people from buying property at below
market value at the best time in a generation with an argument
which might scare you even more if you do not buy property.
A sound economic policy?
We now have the Bank of England using the
last resort of ‘Quantitative Easing’ (a technical term for printing
money.!) If this printing money strategy has the usual effect of
producing (hyper) inflation down the line, the real value of all your
savings would be wiped out. It’s not all bad though because the real
value of all your debts would be wiped out as well. So it does not take
a genius to conclude that in these circumstances the right thing to do
is borrow as much as you can and buy high yield (high rent) property.
So, assuming you are still in the game and want to
achieve some kind of financial security, what do you do? We know that
we always say property, but are there any alternatives to property?
Gold is always a favourite and it has done well in similar
circumstances in the past,. The trouble is it is not an easy asset to
invest into in a sensible way. Gold is primarily a "haven" investment
and is used mainly to protect,rather than increase, wealth. You can
invest in shares, but given the FTSE's performance in recent months it
is a very risky and uncertain investment.
So what you need to do is weigh up what you have to
gain and what you have to lose and act accordingly. If ,like most of
us, that means you do not have enough current assets to retire
comfortably, then now is the time to start buying high yield property.
Why now? Well ,because if the next stage of the slow motion car wreck
which we call the economy overtakes you, then it will be too late
because your deposit will be worthless and mortgages will be even
harder to come by than now.
Of course, there is the chance that the final
meltdown won’t happen and, like the Japanese before us, our economy
simply becomes becalmed indefinitely. In this case, you still win
because interest rates will stay low and you will have the high rental
income to live on. Then there is the best case scenario to think about
as well, that is where the economy recovers and property prices start
to increase, if you have your high yield property in place you will
then be in a position to have achieved capital growth as well as having
secured a high income for retirement.
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