I was at the first morning of Peak Performance 101 Workshop and it was interesting to find a lot of people who say they are a Property Investor, or Property Developer. There were about 10 from 40, that’s HUGE!!! I guess I shouldn’t be surprised since I already know (I told you didn’t I…)
… That money goes to where it’s treated best, and right now, property is NOT treating money as well as before! So it is really a good call to write about Real Estate and Trading…. been on this theme for 2 weeks now! Bear with me for a few more points …
7) GROWTH FACTORS -what conditions will allow increase in value to your investment?
a) Real Estate – generally, growth in real estate is attached to
- “Good news” — good economy, job growth, and with increased migration or changing demographics, an increase in demand that push prices up.
- “Scarcity” – for example, the limited land along waterways which features relaxing views and create exclusivity, attracts a premium and increase its value as people compete for these kind of properties.
- Inflation –With people’s expenses going up, people also invest in Real Estate so they can experience increased value of their assets, it’s like a protection from inflation.
b) Trading –
- “Good News”
(1) Good economy, job growth tend to favour Stocks in general, companies tend to do well in environment with high demand and good consumer confidence. Don’t you feel able to buy more when you are not worrying about being in the red a little bit or if you are going to lose your job?
(2) Demand growth – growing incomes allow more value appreciation for more expensive things like houses, cars, appliances or food as well as other “discretionary” or non-essential items. This is good for almost every kind of financial product that experiences high demand like stocks of companies that produce consumer goods (like the popular Apple phones or computers, cars and the oil / gas companies that produce and distribute them)
(3) When people have more buying power, it tends to cause inflation, and governments raise interest rates to try and slow down rising prices. Higher interest rates benefits the currency of that country at current conditions steady rise is seen on Indonesian Rupiah, Australian Dollar, South Korean Won
- “Bad News”
(1) War – tend to increase the appeal of Gold as safe haven and Oil as a precious energy source that wars tend to consume
(2) Recession or slow economic growth – these are the times that interest rates are lowered by Central Banks wishing to make more money available to people who have loans. When interest rates are cut by .50% for example, a person with $250,000 loan will pay about $100 LESS on interest repayments a month and can buy other goods/services. This can go the same way with companies who have bank loans. With less loan repayments, or low borrowing costs, they can either put it to fund projects or give back money to their shareholders, thus stock prices tend to grow even if the economy is in recession or in a low-interest rate environment.
(3) Low US Dollar – because this is the world’s reserve currency and used to price many commodities in demand around the world, the movements of US Dollar affect the price of Gold, Oil and other commodities. There’s what is called “Inverse” relationship to the other commodities, if the US Dollar is trending down (weakening), the price of commodities go up, because it becomes more “affordable” to non-dollar holders.
Notice that in Trading– there are always opportunities on both Up or Down and even Sideways market. There are financial instruments that could be traded that perform according to different market conditions.
Anything can happen in the world, really. And a girl has got to be prepared, don’t you think?! That is why Shoes with a classic design is a must-have wardrobe staple! It doesn’t matter if it’s summer or winter, you’d always be in the thick of the action! Trading is the same as it is an all-weather business! Now you know, that like Smart Shopping, this is a must-have skill!
8) Create Value
a) Real Estate
Lifestyle shows are very popular these days, the “Extreme Makeover”, “MTV Cribs”, “Biggest Loser”, “Oprah” episodes on becoming a better person or looking good etc, the key to adding value in Real Estate is to “make it beautiful” or create more usage. For example,
If it’s an Apartment or Unit — you are limited to improving the “inside” of your property,
- Renovate or “capitalize” on key areas like the kitchen or bathroom
- Add more space – enclose a balcony so it has indoor use or add storage
- Make it attractive – all the apartment owners can vote to do a facelift for the whole building i.e. rendering or repainting, change windows
If it’s a House or structure on it’s own Title, in addition to the above
- Enclose a carport to make it a garage (more secure and more storage possibilities)
- Add an Attic or clever use of existing spaces like storage or children’s nook
- Add environmentally-friendly features like solar heater, sunroof or plantlife
- Add a “granny flat” or separate self-contained studio you can rent out
- Rezone – some Residential property can be rezoned for Commercial or Mixed-Use say if the area is getting too much traffic, a house may be converted to Display Center, or Doctor’s clinic, childcare center, maybe even a café or art gallery that benefits from foot traffic or exposure (for advertising purposes).
With your own powers, you generally can’t do anything to improve the value of an investment. You can’t raise the value of your Bank shares for example by taking out a larger loan, (you wouldn’t do this for the sake of a rise in share price anyway). Although collectively, with higher demand – as many people take out more loans, the banks could be more profitable. But you can’t increase the value of assets you trade on your own. (Well, maybe if you’re part of a Cartel, like what those Saudi and Oil guys are doing! Your days are numbered, Oil will eventually run out! Hmmppp!)
I know a Gold trader who works in a bank who once told me his clients “create value” with scrap Gold, they’d buy the scrap cheaply and then reprocess for new jewelry. I realized how true this is when a friend of mine who has a pawnshop was telling me about her last holiday, she said at her last holiday in the Philippines, before she leaves the country, she’d have bangles made out of them, she could jack up the price of the jewelry by increasing the purity (makeit 18K instead of 14K) and adding artistic value with more ornate design. She doesn’t even have to declare it in Customs. Smart old hen!
To create value in Trading, what you need to do is to improve yourself and your skills and knowledge. Remember I said earlier that the key to consistently generate income in trading is Self-Mastery. The doing when something needs to be done and NOT doing when it is not supposed to be done (self-control). So keep learning about yourself, address your weaknesses and cultivate positivity. Review the article “It’s not me, it’s YOU”.
9) Expansion Strategy
a) Real Estate
- Redevelop – you can apply to redevelop a property, say build dual occupancy or duplex – where 2 families can have separate living spaces), provided the land area is big enough to satisfy the local government guidelines. In one area we were looking at, the minimum is 600sqm and frontage (how wide it is at the front) must be 20sqm. Some areas designate 1000 sqm to be the minimum, with 500sqm needed to be given its own land title. These rules could change depending on the changing economic situation, for example when a rural area becomes more populated with working families and businesses moving in, thus transport and other services have to be stepped up.
- Some investors thus take a long-term view and buy land that is close to the city (1 hour commute or so) to sell or develop later. Note that this could be 10-20 years though and is largely uncertain, you still have to work with the local government for approval. You could check with Development Plans of the local government or State you are interested in for further clues of economic activity planned for the area or whether it will be designated for Industrial use, or developed for tourism if people are already attracted to its environmental features. An airport or rail line could massively increase the value of your landholding.
- You can expand your Trading business by branching out to other markets . Many companies, because they are used by people worldwide or operate in many major economies are listed in more than one Exchange (or country). For example, since you already know the company and able to trade it profitably, you can choose to trade it in other Exchanges — like BHP the biggest mining company in the world which has headquarters in Australia and traded in Australian Stock Exchange, is also traded in London Stock Exchange, New York Stock Exchange, Johannesburg Stock Exchange. You can also easily do this on FOREX , Oil and Gold, trading it on different time zones. For example, the Japanese Yen, which is a very popular currency for trading, you may choose to start your trading day in the Asian timezone, then follow the sun to the European timezone and then to the US timezone. (Sleep optional!)
- You can also Trade other investments or instruments that have a relationship with the one you are currently trading. You could do this when you are trading something and know other investments move with opposite effect (an Inverse relationship). For example, Japanese Yen is stronger, stock prices of some Japanese companies like Toyota, Canon go down – because they generate most of their sales outside of Japan and get paid in US Dollars in their terms of trade. With a stronger yen, there will be less Yen for every Dollar they receive.
- Similarly, you can trade one that moves the same way, for example, when Oil as a Commodity is going up, stocks of Oil companies go up.
- System – you can develop a new system and take advantage of more opportunities. For example, a system that achieves 5% per month writing Call Options in a Sideways market but does not perform as well during Bull market. To take advantage of opportunity of an uptrending market, develop a system that will not cap profits or be able to ride the Trend.
- Automation– with automating your system you can certainly handle more funds to manage, for example, you can go from 500,000 to 5,000,000 easily. It also makes the position sizing more accurate and allocate with discipline. It takes away the human factor, with less error and will trade without emotion, just following the rules you have set with your system. An automated system will not be “scared” to take an entry position or be “greedy” and not wait for more profit if the price is already falling on the 10% threshold you’ve set. It will also make your operation more efficient — facilitating faster turnaround time with the documentation for your own performance or client reports and tax filing for example. With increased efficiency, you can focus on growing your Trading business by trading other markets or accept new funds.
I am heading off to walk and think of more things to write! Will be back soon…
Thanks to Via Uno for their divine shoe images…