Simon Ramo is a legendary American engineer who wrote a book in 1970 about, of all things, tennis. It was titled Extraordinary Tennis for the Ordinary Player. The engineer in him noticed tennis involves two games – one is played at the professional level and the other is played at the weekend warrior level.
BY MICHAEL YARDNEY
Now, that’s not a particularly brilliant observation, but the conclusion he reached from his observation is. After extensive analysis, Ramo concluded professional tennis players win points while amateur players lose points.
In other words, for professionals, most points are won by hitting a spectacular winning shot that’s just out of reach of their opponent, while amateurs typically lose points by making an unforced error.
In a recent blog, financial planner Hawley Mclean discusses a famous 1975 article for Financial Analysts Journal in which investment analyst Charles Ellis extended Ramo’s tennis concept to the investment business.
Ellis said investing had flipped from being a winner’s game to a loser’s game. Put simply, to succeed at investing you need to focus on making fewer avoidable errors rather than making spectacular winning investments.
Making fewer avoidable errors is a worthy goal at any time, but it’s critical in today’s turbulent markets. The best way to explain this is that during property booms it’s easy to look smart. Rising values cover up many mistakes. Now that our markets have been flat for some time, many investors who didn’t have a proven strategy are finding themselves floundering.
That’s just confirmation of investment guru Warren Buffet’s famous saying: “When the tide is out, you can see who is swimming naked.”
On the other hand, at the same stage of the cycle other more strategic investors – those who understand the importance of correct timing, proper asset selection and smart financing using buffers to see them through the lean years – are still heading towards financial independence through smart property investing.
These successful investors are not trying to get rich quick. Instead they focus on making fewer avoidable errors by using proven trusted property investment systems.
Michael Yardney is the director of Metropole Property Investment Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Investment Update blog.