Emotions can play a big part when investing. It’s easy to let our emotions and our biases get in the way when making investment decisions.
Another example of where emotions can get in the way is when we buy investments for the Fringe Benefits. For instance – you really love the Sunshine Coast and you buy an investment property there so that you can use it occasionally for holidays and perhaps even move into it when you eventually retire. Of course, the periodic nature of holiday or coastal rentals means that the maintenance and holding costs are much more than they should be, and by the time you retire you’ve probably got your eyes on something bigger and better anyway.
If there’s a fringe benefit associated with any investment, you can be sure that it’s dragging down the overall performance of that investment. If you don’t let fringe benefits or emotions get in the way and treat your investments as just boring money making devices, then one day in the future you’ll be able to afford any beach house or penthouse your heart desires.
Try to keep your emotions and personal biases out of the decision-making process and let the numbers do the talking.
Other examples of investing with fringe benefits and personal biases include buying luxury real estate for status or ego, turning your own home into an investment, buying the commercial premises you run your business from, or investing in time-share.
Investing is all about analysing the numbers and future growth drivers. It’s important to separate your lifestyle choices from your investment choices.