Has following the crowd ever worked? I guess decades ago the great explorers of the world didn’t have a choice to set their own path to discover the new world. But there had to have been a time and place where following the crowd became the new normal. Whatever transpired to make people stop thinking for themselves, it wasn’t good for anyone.
This past Christmas, if you haven’t started shopping online and still fighting the crowds, what are you waiting for, get online. If you are like me, some things you want STILL are not available online, so you have to battle the crowds and spend hours shopping and waiting in line. But something strange kept happening to me this year, over and over again. In the big box stores, the lineups were at an all time low, wait times like I have never seen before.
But a Christmas miracle kept happening, over and over again. I was challenged to see how to avoid the crowd mentality and I focused not on the largest lineup, but on where I can find a cash register with on lineup, and guess what happened to me at every single store? I never waited in a lineup all Christmas, but why? I wasn’t just following the crowds and the lineups, rather I was eager and determined to do my shopping in the fastest manner possible. The 75 person lineup at Indigo, I avoided 100% because everyone forgot about the cashier on the top floor, I didn’t, no lineup. You should have seen the faces of the people in line when they saw me walking out the store with my bags long before they moved an inch. So where did we go wrong and what the heck does this have to do with real estate you ask? EVERYTHING.
While following the crowd might work in the short term, it fails over long periods of time. At some point, real estate becomes expensive and then it becomes absurdly expensive. Then the market collapses. It is a natural ebb and flow of the market that has always happened, and always will, but why do so many people fall, over and over again? Understanding this further requires a bit of independent thinking and analysis because the market or the crowd doesn’t always get it right, in fact, they rarely do.
Warren Buffet is great for a lot of things, including great insight. His philosophy is to invest when people are running away and run away when people are investing. Great advice to live by.
A crowd to be avoided at all costs are analysts in the media. You’ll hear them always say that things will be much better in the second half of the year. However, they never say why. It’s just like early 2008, just before the global meltdown. Prior to the meltdown, here in Toronto, there was lineup after lineup of people waiting to get into an investment in the condo market. There were companies started to have people stand in line for you so you didn’t have to lose your spot and your chance for a very questionable investment. That is not smart investing, and you have no leverage in that scenario. Sadly, when I asked people why they were standing in line, the answer shocked and saddened me, “because everyone else is, so it must be good!” Oh boy, I knew something major was about to happen, and sure enough it did, the greatest recession we have ever seen.
Ken Fisher writes in his book, “Beat the Crowd,” that:
“Very well-read, bright people who pay close attention to the market often make bad investing decisions! There is usually one simple reason for this: They inadvertently get sucked into the consensus views.”
It’s human nature to want to follow the crowd. If everyone else is excited about a particular investment, you feel like you don’t want to miss out on the next big real estate boom. Yet following the crowd when investing may end up costing you more in the end. Plus, if it sounds too good to be true then it probably is. Take time to look at the investment and see how it fits into your long-term investing goals and stick to your own strategy.
We understand that it may be difficult to get caught up in the excitement of investing—watching the market go up and down—when your own money is on the line. But the decisions you make when you’re overconfident can impact your wealth negatively for a very long time.
The lesson here: Never follow the crowd! Forge your own path and make your own decisions for what is best for you and your goals. Here is the great thing about NOT following the crowd. Investing is easy, and opportunities are abound if you know where to look and how to act in accordance with opportunity that is right in front of your face.
If you want to know how I discover incredible opportunity day in and day out, just give us a call 416-913-1089 or email us at firstname.lastname@example.org, until next time, Good luck investing!