Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Tuesday, 8 January 2013

What advice would you give your 16 year old self?

Big Issue
I saw a potentially interesting article in The Big Issue magazine over the weekend, which posed the question: “What advice would you give to your 16 year old self?”
Unfortunately most of the respondents were self-satisfied celebrities who gave such useful hints as: “I would advise myself to once again accept that million dollar role in Spielberg’s film” or other such guff.
Celebrities, like politicians, are well versed in the art of not side-stepping questions, rather preferring to answer any poser with some pre-planned self-promotion (did you see my appearance on Weekend Sunrise? Oh stop it, I’m joking!).
You often hear people say things like “I have no regrets” or “if I had my time again I would nothing different”.
While it is true that we are ultimately the sum of our past experiences, I, like most people, would aim to do a whole range of things differently if I had my time again. I would try to spend less of my youth drinking Guinness. I would definitely try to smoke less. Most pertinently I would try to spend less of my time being an obnoxious twit.
For the purposes of today’s blog post, however, I will restrict myself to discussion of personal finance and investment. After all, I am highly doubtful that you have visited the financial Blogosphere today to hear such pearls of wisdom as “don’t be such a twit” (however incisive and enduring that little gem of advice may be).
Instead, the eight ideas that I would pass on to my 16 year old self would be these:
1 – Start today
The earlier you get started the longer you will have to compound your wealth and small progress today can snowball into great returns later. There will always (and I do mean always) be those telling you that now is a bad time to start. Resolve to get started and if you make some mistakes, so be it – resolve to learn from them.
2 – To compound your wealth, compound your education
Resolve to start learning about personal finance and investment and just keep learning.
I started 2013 I the same way that I started 2012, 2011 and 2010, by reading The Intelligent Investor by Ben Graham. This book is decades old but the relevance it continues to hold never fails to amaze.
If you understand investment then you don’t need to rely upon hot tips, hearsay and hogwash from others – you will know for yourself what constitutes a sound long-term investment.
Graham noted that after the Great Depression and a World War fewer than 5% of surveyed people believed that stocks represented a good investment. In fact, the dreadful run for the markets in the period after the Wall Street Crash from 1929-1945 stocks were seen by most as no better than a pure “gamble”.
And yet think back to 2007: virtually anyone who bought a stock was considered to be “an investor” – there was even talk of “nervous short-selling investors having been burned” which is about as big a contradiction as it is possible to make.
The reality is that when everyone else believes the sky is falling this is probably a fair indication that you will soon be able to buy quality assets at under intrinsic value. Thus it proved in the decade or so after the Second World War, with the Dow increasing an astonishing fivefold from around 100 to above 500.
So it is in property. A spate of commentators opining that “property goes up 10% per annum” or “property is safe because you can see it and touch it” was a sound indication that the end of the last great bull market was finally drawing near.
3 – You don’t have to spend all of your money
You often hear people say that they have come into some money so they had better spend it on a car or holiday before a commitment comes along that sees it ‘wasted’ on necessities. We should be very careful about the vocabulary that we feed our brains as it tends to be far more powerful than we ever realise.
I sometimes get asked if “anyone can make a million”? It’s a bit of a loaded question, but it’s certainly true that most people will come into a million dollars through their lives. Consider this: if you earn, say, $50,000 a year over a working lifetime of 40 years, then you will earn $2 million without taking into account wage increases for inflation.
So the question of whether you can make a million dollars is probably the wrong one. The real question is, can you keep a million dollars?
Oh, but what about expensive living costs, holidays and car running costs say you might ask? Well, I never said that it will come easy, I just say that it can be done. What are you prepared to sacrifice for your financial success?
By the way, the sacrifice needn’t be forever. You might have to forego expensive holidays when you are younger, but once you have achieved a certain level of financial success you will be able to go on holidays better than any you ever dreamed of.
4 – Mates are only impressed by cars for one month
16 year old boys desire flash cars to impress people with. Come to think of it, so do 35 year old boys. New cars tend to only interest your friends for a relatively short period of time - then they just start to cost you a lot of your hard-earned money.
By the way, see point 3 – you can buy amazing cars when you are older and wealthier. Better still, you can rent the cars of your dreams (and then give them back afterwards).
5 – A big house can be a bind
Conventional wisdom suggests that we should buy the most expensive house we can afford as a principal place of residence. This is by no means necessarily bad advice. What tends to happen is that people reach the level of attaining a well-paid position then proceed take on an enormous mortgage somewhere between the ages of 30 and 40.
If you are successful in paying down the debt over the duration of the mortgage this can lead to a good result, perhaps allowing you to down-size for your retirement. Be wary, however, that taking on ever-greater mortgage debt for your residence can restrict your ability to build a portfolio of other investments.
6 – Invest for the long term
All the evidence shows that if you can build a plan for the long term and invest in quality assets you will finish well ahead. Don’t focus too much on trying to outsmart the market over the short term – for most us it’s no better than guesswork.
7 – Don’t listen to people who don’t know what they’re talking about
Every weekday the news tells us that the All Ords has gone up or down by 20 points and everyone seems to have an opinion on what will happen to the market next. In truth, most people are fooled by randomness: they have sometimes guessed the market’s direction right before so they think that they will be able to do so again.
It’s fairly easy to work out whether someone knows their stuff: ask them what the All Ords actually comprises and how the index is measured or what the market’s average PE ratio and dividend yield are.
Much the same applies to the property markets – we all have some experience of property markets which seemingly creates instant experts of us all. Everyone seems to ‘know’ where the property market is headed, despite the greatest investors in history concluding that short-term outcomes are not predictable.
8 – Never, ever give up
When you hit upon problems, this is just the universe testing your resolve...now go get ‘em tiger!