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Knowing what to buy, or buying in to what you know?

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Investment Lessons  New Investment Ideas 

Knowing what to buy, or buying in to what you know?

By - Thursday 11 February 2010

With the increase in available research tools for investment it’s easier than ever to look up “advice” as far as investment vehicles are concerned. 9 times out of 10 though, most investment web sites will either tell you something you already know, or have you shouting at your screen in disagreement. Eventually one invariably finds oneself reverting back to old adages and sayings, and then finally either doing what you had already decided, or, doing absolutely nothing at all.

For the most part, the actual consequences of this process for comparison are never known because no action (or the same action) takes place, and as a result nothing can actually happen. Imagine this though, what if you could avoid the inevitable road of peril and frustration above and actually form a cunning plan of action that would yield something?

Of course, the idea of venturing into new investment arenas can be somewhat unnerving to say the least, even for the most avid of investors. On the contrary, just take a glance back a few months and take a look at Buy to Let. Even if you didn’t understand Buy to Let fully at the time, the picture painted by the media at large was a salesman’s dream as far as the investment property world was concerned from the sheep mentality angle, with  most of those sheep still crying into their cornflakes!

New investment ideas needn’t be baffling. Having said that, a 300 year old saying isn’t very likely to ring true in this day and age either. Similarly investment property buying advice from a TV presenter who probably still lives at home with their parents should be considered with large pinches of salt at the ready.

One would hope (and for the purposes of this post) you know how much you actually have to invest. Once you know that, stick to it and don’t get “loaded” or sold up.

Establish how long you want to invest for. If you want to plan something to act as a pension fund for an 18 year old, a day trading account is probably not the best option. Knowing how “liquid” or “illiquid” your investment will be is important.

Finally, decide what you want the investment to achieve. Now I appreciate the initial thought is probably along the lines of “retire!” but try and be realistic here. Think along the lines of whether it needs to be a reliable income generator, a tax break exercise, a long term nest egg, a mid term capital generator or even an outright blatant gamble.

Once you have got to grips with all of the above, it will make it a lot easier to establish what investment vehicles are available to you.

This next piece of advice might sound a bit odd, but it does ring true if you think about it. - When you have your investment options in front of you, stop looking for more! Concentrate on what is there. All too often people will keep adding ideas and comparing this and that with other things that Joe said down the pub, most of which are usually as a result of “anecdotal evidence” that inevitably lead to procrastination. In the case of anecdotal evidence (usually found in bars and a large number of investment property forums) as hard as it is, try to ignore it. Rarely is it ever supported by any actual proven fact and all it serves is to prolong the indecision due to confusion, causing investment procrastination which subsequently means you resort to either continuing to hide cash under the bed or, leave the cash in the bank because “its all too complicated!”

Keeping a clear head is paramount. Understand what you are investing in. Ask the product provider. If they can’t explain it to you in a way you understand, move on.

Using new investment vehicles needn’t be hard, just focus and understand what they do, if the risks and rewards are within your investment tolerances, you shouldn’t go too far wrong. If you insist on sticking to what you know, or your research leads you to repeat the same investment, make sure you use updated and current research to catch up with any changes. What might have been a flyer could now be destined to crash and burn!

The bottom line with any investment, (and the comfort that should go with it) is understanding. If you don’t understand - ask, if it can be explained - great, but always remember, your investment won’t ask you!

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.

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