088: 5 Biggest Passive Investors’ Faux Pas
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Do you know what a fashion faux pas is? What about an investing faux pas? 🤔🤔
Where do most investing mistakes come from? Well, mistakes always arise from some form of faux pas, right? So what is a faux pas? In French, a faux paux literally means “false step.”
An investor’s faux pas can arise from a lack of understanding, incorrect data, ignorance, inexperience, impatience, or even arrogance. Why do faux pas exist? In short, it’s because they only see things through their own eyes.
What are the biggest passive investors’ faux pas?
A know-it-all person: this person is closed-minded, a know-it-all, is not willing to listen to other experts, or adjust/pivot business plans when needed
1️⃣ A trust-without-verifying person: this person invests blindly without looking at the math, the historical data, or even the sponsor team’s track record.
2️⃣ An analysis paralysis person: Tony Robbins said, “The path to success is to take massive, determined action.” The Kitti Sisters’ revised version says “The path to success is determined by the speed of implementation.” We can dot all our ‘i’s’ and cross our t’s’ until we are blue in the face, but all this means nothing if we keep it theoretical. We must execute! If the deal checks off our internal investment criterion, make sure you don’t succumb to analysis paralysis.
3️⃣ A shiny object chaser person: this person succumbs to the allure of a high yield. Making money while you sleep FAST is a beautiful thing; however, if everyone else projects a 100% return in 5 years, but your GP is promoting 200% in the same market, you may need to paluse and do further investigation. We’re not saying it’s impossible but we are saying, review the process and do your due diligence.
4️⃣ A mismanaging expectations person: building a passive income portfolio can be exciting and financially freeing. However, if you’re looking for cash flow, but the investment opportunity has appreciation and tax saving plays, then that particular investment opportunity may not fit with your internal investment criteria.
4 simple tips to remove your passive investing faux pas
You see many passive investors overlook this simple yet effective way to care for your investment. 🙌
No. 1 Pay attention to the macroeconomic
Learning how macroeconomics plays a role in your investment is a must. You have to be able to see signs of what’s to come. How the current bond market will impact your investments, how the “stronger” dollars will affect the overall strength of the economy, and how the macro economy will affect each asset class differently.
For example 〰️ in recent news, the Bank of England 🇬🇧💂, which is the equivalent of the U.S. Federal Reserve just reversed course and will start up quantitative easing AKA – buying bonds, printing currency, etc. because their pension system is on the brink of collapse due to the pension system asset managers are experiencing negative levers on their bond purchases.
No. 2 Align investments to goals
Before investing, the questions you should ask are:
✔️ What is the outcome you’re looking to achieve?
✔️ What’s it for?
✔️ What is the goal?
This may sound simplistic, but the time frame of the goal determines investment allocation.
For example 〰️ if you’re in your 60s though your portfolio is performing well, you may have to move certain parts of your portfolio to fixed-income investment as it would lend stability to your portfolio and help you meet your retirement needs. Now, if you’re younger you may be able to afford higher-risk investments that yield higher interest.
No. 3 Work with experts
Whenever people think they know more than they do, they are under the influence of an illusion of knowledge. The information does make one knowledgeable; however, it does require time and effort to acquire it.
In his 📖 book, Outliers, Malcolm Gladwell cites research that states that in order to become a world-class expert in any field, you have to practice a specific task for at least 10,000 hours.
Remember that when you are trying to enter a new arena, you are starting from the lowest point on the totem pole. You need time and talent to become an expert.
While you can go on LoopNet, and search for a commercial building to buy. FYI 👉 in our personal experiences good deals are not on LoopNet; however, LoopNet for some investors can be a good starting point. And slowly gain your expertise.
But as you can imagine, it will take a lot of time, talent, and effort to gain the trust of brokers, sellers, investors, and even the property management team that you want to hire to operate your building.
That’s why we highly recommend you to work with experts so you can leverage those who already have those relationships in place so that you can achieve the FASTEST 🚀 path to success and avoid passive investor’s faux pas.
No. 4 Diversification
Risk means that more things can happen than will happen. You do not expect that the house that you live in will burn or your car will meet with an accident, but it might. So you insure against the risk of fire 🔥 or accident.
So, do not put all your money into one apartment complex, or even one city. Diversification should be of the right kind and for the right reason. You guys know us, we love real estate and are all in; however, we do diversify within it, right?
We have properties in Dallas-Fort Worth, Houston, Atlanta, etc. While we may not diversify in asset classes, we do diversify and strategically invest in different markets.
Cashflow Multipliers, that’s it for today, hope you learn a thing or two about the passive investing faux pas. While there are so many ways you can misstep in investing – lack of understanding, incorrect data, ignorance, inexperience, impatience, or even arrogance there’re ways to combat them through our little 4 simple strategies.
Thanks so much 🙏🙏 for tuning 🎧 in all the way to the end, and remember – you can get exclusive tips and tricks through the Kitti Freedom Club, so join today!
While you’re at it, make sure to check out our other episodes, and if you have a question or comment, or simply want to say hey, don’t hesitate to reach out to us on social media or visit our website a thekittisisters.com.
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