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Who the hell do you trust?

by alex brownbill

“Compared to many other countries in the world, Australia’s income to debt ratio is about average. [Words, words, words]…therefore the fears that Australia’s housing market is in a bubble is unfounded.”

So said economist Stephen Koukoulas (a highly regarded expert) last week at a summit for mortgage brokers.

Compare this to Roger Montgomery’s (Roger is a very well respected Australian investor and funds manager) headline writing in The Weekend Australian:

Brace for sell off: property market at a tipping point

I think I have the perfect acronym for this – WTF.

Two highly regarded experts giving completely opposite opinions.

The conclusion? Don’t trust ANYONE! Don’t trust me. Don’t trust Roger. Don’t trust your financial adviser, real estate agent or your mate. If Stephen and Roger can’t agree with each other, there’s no chance we’re going to be able to come up with any reasonable, rational explanation for our beliefs about the property market.

This little example sums up a LOT about financial experts.

They are only write about half the time. Predicting the future in finance is akin to flipping the coin. Handing over your money for a financial expert to invest will yield no better results than picking many random stocks and just letting it do its thing.

Property as with stocks or any other investment is very difficult to time. All of the beliefs you have about ‘now being the right time to buy’ or ‘I think the fundamentals of the market in this area are strong’ are just that – beliefs.

Beliefs founded in whatever cognitive bias you’ve created to justify the course of action you want to take. This isn’t a bad thing – as long as you’re aware of it!

Sure, you can make some educated guesses about areas that are up-and-coming and you may guess right. All you can hope for is that you’ll be right a little more than 50% of the time (AND that you have enough rolls of the dice to be able to average it all out).

As financial advisers, all we can do is point you in the right direction: make sure you’re invested. Don’t panic when things aren’t going well!

We can also educate. Don’t rely on anyone else. Make your own assessment.

Life’s a voyage!

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