Sublime Subprime - Part 2 of 3
Keywords: Tony Melvin, Sub Prime.
By Tony Melvin, founder and Author

To refresh your memory, part 1 of the Sublime Sub Prime Series isolated the 3 most important questions regarding the financial catastrophe in the USA. These are:

1. What are the possible repercussions of the sub prime crash?
2. What can the investor do to proof themselves for any future repercussions?
3. Why did this happen? (so we can learn from it)

While part 1 answered question 1 above, this second article will focus on question 2 – “What can you as an investor do to proof yourself from any future repercussions?”

The last article ended with a quote from the worlds’ most successful investor, Warren Buffet who said:

“We simply attempt to be fearful when others are greedy and to be greedy when others are fearful”

This should give you a hint of the answer to “what should you do?” The first step is to not get fearful!

Right now a lot of people are concerned and worried about what is going to happen. And the media fuel this fear based on the false idea that it helps them sell more newspapers or get more ratings. As part of the first step, what you should do is take a look at what is really happening, as an investor. Here are a few things you can get the facts on:

1. Are property prices rising?
2. Are properties still selling?
3. Is the population growing or shrinking?
4. Are wages increasing or reducing?
5. Do people still want to live in a property????

If you read the book How to Achieve Wealth for Life you’ll know that the value of any investment is driven by Supply & Demand. To get an idea of what is likely to happen over the next few years simply look at the current trends of supply and demand. All the questions above relate to supply and demand.

Australia, unlike the USA, has a strong economy. It also has a growing population and strong immigration with people coming from all walks of life to live here. And in the places where people want to live and need to live because of work, we are not building enough dwellings. This means there is demand and little supply. This will increases prices over time.

But as mentioned in the first article, don’t take my word on it. Get the facts yourself and do your own research on questions 1 to 5.

Understanding the dance between supply and demand sets the investor apart from the masses who act on fear and greed alone. Another important factor which puts the investor into the realm of our friend Warren Buffet is having and following a strategy.

Your investment strategy is the key to riding the ups and downs of the economic cycle. The definition of the word strategy is: a systemic plan of action. And I would add to that definition “that gets one closer to their goal.” So a strategy is a systemic plan of action that gets one closer to their goal. Systematic means carried out in a methodical and organized manner or a step-by-step approach and the success of your strategy depends on how well you follow and do each step of your strategy.

In our book How to Achieve Wealth for Life we explain a buy and hold property strategy that enables you to build your property portfolio over time using your equity. This is a different strategy to property development as covered in our recent seminar tour with Carly Crutchfield (who’ll be visiting Perth and Newcastle next month, for more details click here). There are thousands of strategies you can follow, the key is to decide which one suits you, taking into account your available time, experience and personality. Once you find which strategy suits you, then do all you can to learn about the strategy and follow it.

This is the answer to our initial question at the beginning of this article - What can the investor do to proof themselves for any future repercussions? The answer is: follow your strategy. If you don’t have one, then you better deicide on one quick regardless of any current economic turmoil, for investing without a clearly defined strategy is like driving a car with no destination in mind. If you find that your strategy is harder to follow now because of tight economic constrains or inability to get finance, this is where you need to start thinking outside of the square. How can you get it to work? Don’t use it as an excuse to stop, rather use your challenges as a means to improve yourself and your strategy.

I hope this article has given you some insight. I’d be pleased to hear your feedback and feel free to ask any questions. Please email news@knowledgecentre.net.au or simply reply to the newsletter email.

The next and final chapter in this Sublime Sub Prime series will answer the question: Why did this happen? I consider this one the most important question of all!

Until next time – don’t get distracted, just follow your strategy and get closer to your goal.

Author & Founder

books by Tony Melvin