The wealth cost of fear. and how to overcome it

There has been a run of fascinating research into fear and the psychology of investing, much of it highly relevant to the current property investment market in the United Kingdom and beyond.

In summarised form, what two Nobel-prize winning researchers (Daniel Kahneman and Amos Tversky) found was that......

1. People tend to think and act in terms of gains and losses, rather than in terms of their wealth position, and

2. Financial losses loom much larger for people than do financial gains.

Because of these two factors, people tend to be far more risk-averse than they actually need be, especially if looked at in term of their own rational self-interest over the longer-term.

In fact, the short-term/long-term distinction turns out to be critical.

In a 2002 interview in Forbes magazine, one of the Nobel researchers (Kahneman) pointed out that when you think in terms of wealth you are thinking long-term, and that when you think in terms of wealth you tend to be much less risk-averse.

Other research published in mid-2005 and cited by Forbes compared the investing performance of 'normal' participants and those with lesions to that part of the brain that controls emotions. In a simulated investment exercise the brain-damaged players made better investment decisions, meaning that they invested more often (where the odds favoured investments generating a net gain). The implication is that emotion interferes with investment decisions.

Put that together with the Kahneman and Tversky findings and what you get is that the fear of short-term loss weighs so heavily on people that they invest less than they would if they were following their own rational long-term self-interest.

This situation is highly pertinent to property investors in the UK.

House prices in some cities have declined in recent periods (a short-term loss) while the same markets have nonetheless made impressive gains when viewed over a longer horizon (long-run wealth gains).

Every press report of property prices that shows a decline in prices fuels peoples' acute fear of loss, reinforcing their sense that they shouldn't invest in property.

Despite the solid performance of the UK market, and with no reason to doubt its continuation, many investors are still avoiding property.

The scenario where investors abandoned good returns from property because of short-run capital losses mirrors the investment gains missed by the 'normal' research participants in avoiding short-run losses. How rationally self-interested is it to forgo a good return over the long run to avoid a minor short-run capital decline?

Of course, no-one knows ahead of time that the average annual return on a property investment will be good. But there's a convincing argument that property's solid performance over the long-run parallels the odds-on net gains generated by the investment in the experiment with brain-damaged players.

Someone who is arguably more qualified to comment on investment risk and return (although not remotely inclined towards academic research) is Donald Trump. Trump provides another - but different - twist on the impact of fear on wealth. As he observed in his book The Art of the Deal:

I like thinking big.....Most people think small, because most people are afraid of success, afraid of making decisions, afraid of winning. And that gives people like me a great advantage. (Warner Books 1987)
So not only are people more afraid of loss than they are attracted to gain, but they can be afraid of gains as well!

What can you do to deal with fear?

Here are some tips....
Distinguish your fear when it is activated. Fear mostly operates in the background at an unconscious level. Our consciousness of fear - whether of loss or of success - is fleeting at best, but it is necessary to recognise fear in order to not be held hostage by it.

Having distinguished your fear, choose whether you will be stopped by it. You are not likely to eliminate your fear, at least not in the short-run (many fears are rooted in biological needs for self-preservation). But you may choose not to be stopped by it when it is activated, and you are thinking big and pursuing your chosen course of wealth-creation.

Take a long-term wealth-oriented view rather than a short-term gain or loss perspective. A long-term investment horizon puts any short-term losses into perspective, and absorbs the effects of cyclical ups and downs. It therefore allows you to be less risk-averse, enabling you to invest more and create greater wealth.

Get in the habit of thinking big. Entertaining big thoughts may well activate your fear of success, but this will provide opportunities for you to distinguish that fear, and place it in the context of the exciting possibilities which you are pursuing.

Ground your judgement in objective analysis and your actions in rational courage. Do the maths. Identify various risks (market risk, interest rate risk, income risk etc.) and weigh them up relative to sensible estimates of returns. Trump counsels to 'protect the downside, and the upside will take care of itself.' Make safe bets. If it all stacks up, take the plunge and don't look back.

Armed with this understanding, and by following these steps you'll be in a much stronger position to deal with your fear and to short-circuit its wealth-limiting power. Since other people's fears provide opportunities for you, you'll be poised to strike at attractive opportunities which were hitherto off the radar.

Do that, and you'll be profiting from the same sort of advantage enjoyed by Trump.

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How the planets are affecting our finances

A recent Financial Astrology Study by CreditExpert.co.uk has shown that Pisceans and Aquarians are the most comfortable with their borrowing. While Pisceans are very confident in their credit rating (43% excellent or very good), Aquarians fear their borrowing has left them with a poor credit rating (only 34% excellent or very good).

Cancerians are the biggest fibbers when it comes to money matters, with one in six (17 per cent) lying to their partners about spending or debt. This might help explain why they are also the star sign that argues least (15 per cent) about money issues.

For a real argument over finance, link up with a Libran. No less than 44 per cent admit to disagreements about spending or borrowing. They are followed by Sagittarians, on 39 per cent. Librans might have an excuse, as only a third (33 per cent) believe themselves to have an excellent credit rating.

The CreditExpert.co.uk Financial Astrology Study of more than 1,700 people by Ipsos MORI also reveals:

• Capricorns and Arians are the most financially honest when it comes to money - only five per cent have told untruths to their partner about spending



• Those born under the sign of Taurus are the most confident about their credit status, with almost half (46 per cent) believing they have an excellent credit rating



• Sagittarians might argue over spending but they don't generally take it seriously - only one in 50 (two per cent) separate over money matters



• Librans are most comfortable with their current level of borrowing but are the most likely to have a disagreement over money, thanks to increased borrowing in the last six months and discomfort with their credit rating



• Scorpios are more likely than any other star sign to break up from their partners over money worries. Almost one in eight (12 per cent) split from their partners because of financial stress

"Please understand my friend, that where you find yourself tomorrow is a function of the positive decisions and actions you take today." - Akin A. Awolaja Educator

"Often the difference between a successful person and a failure is not one has better abilities or ideas, but the courage that one has to bet on one's ideas, to take a calculated risk - and to act." - Maxwell Maltz Author of Psycho-Cybernetics

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Let it be you by by Jim Rohn

Each and every day, there are people all around the country and world who are living their dreams. Millionaires are made every day. Families are experiencing tremendous relationships. People are becoming more and more healthy. Life-long learners are growing intellectually and improving their chances for success.

The fact is that living the life of your dreams is possible. People prove that every day. Someone somewhere is going to get rich, get healthy and improve their life. My recommendation is this: Let it be you!

Have you ever wanted to make more money? Have you ever looked at someone who has money and wished that it could be you? People think about getting wealthy all of the time, when only a small percentage actually does. But any of the masses could. Someone is going to start a business. Someone is going to make a great investment. Someone is going to begin the journey to great wealth. So why not let it be you?

Someone is going to go back to school to improve their life. Someone is going to become a life-long learner. Someone is going to set a goal to read a book or listen to a CD each week for the next year. So why not let it be you?

Someone is going to look in the mirror and see that they need to lose a little weight and they will make the decision to become healthy. Someone will run their first marathon. Someone will join an aerobics class and improve their health. Why not let it be you?

I think that by now you get the point: Everyday people are improving their lives. Whether you do or not doesn't matter to those who do. They are going to do it, regardless. It is simply a matter of a decision being made. Let that person be you!

You may be asking, "Okay Jim, but how?" Well, let's cover the very simple actions.

The first and most important is to make a commitment to work on yourself. Are you going to improve or stay the same? No matter what you have achieved, you are at a certain point right now. What you have achieved in the past is fine, but it doesn't make a difference for the future. The decision about what you will become is made each day and every day. Each day someone is making the decision to better him or herself. Let that person be you!

The second is to make a plan. Once you have decided to become better you will have to have a plan. It doesn't have to be a long, intricate plan. It can be simple. Save a pound a day. Walk a mile a day. Read an article a day. That is a simple plan with achievable goals. Someone is going to develop a plan that will take them into the future of their dreams. Let it be you!

The third is to begin to act. All of the great ideas, without action, become stale and useless. The key to turning dreams into reality is action. People who have great ideas are plentiful. People who act on their dreams and ideas are the select few, but they are the ones who gain the wealth and wisdom that is available. Someone will act today. Let it be you.

My encouragement to you is to stop looking at others who live the good life, wishing that you were as well, and instead begin to commit to your improvement, develop a plan and act on it. Someone is going to. Let it be you!

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"The difference between the impossible and the possible lies in a person's determination."- Tommy Lasorda Professional Baseball Manager

"Keep away from small people who try to belittle your ambitions. Small people always do that, but the really great make you feel that you, too, can become great." - Mark Twain 1835-1910, Humorist and Writer

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Introducing Private Label

In order to achieve wealth through property investment it is essential to build a diverse portfolio containing a range of different properties. It is with this in mind that we have introduced Private Label.

Private Label is aimed at those investors wishing to build a wealth building property portfolio quickly and cost effectively. In fact, Private Label is the most cost effective way of purchasing property through Property for Life with savings in the region of 50% on the usual levels of investment.

Private Label is a full service product which means that you can take full advantage of our company's skill, knowledge and influence within the market place to build you a professional investment portfolio with no prior experience or knowledge.

Quite simply you benefit from substantial savings on the costs of building a property portfolio by making an upfront investment to build your portfolio with PFL, but it doesn't end there. Private Label members will also benefit from a host of other fantastic benefits.

• Savings in the region of 50%


• 48 hour priority notice of newly available property


• Access to password protected web area with special one off property offers


• Dedicated portfolio manager


• Personal strategy consultation with Property for Life MD David Austin


• High quality leather bound membership pack complete with branded pen and other items

Whats available?

We currently have the following investment opportunities.

UK property
Kingsway House, Hallgate, Doncaster, DN1 3PE
Sherbourne Park, Chandlers Way, Sutton Manor, St Helens, WA9 4TY
City Walk, Sylvester Street, Sheffield, Yorkshire S1 4RW
Luxaa Apartments, 79 Balby Road, Doncaster, DN4 0RE
Perseverance Mill, Dewsbury Road, Elland, West Yorkshire, HX5 9AX
Furleys Wharf, 10 Bridge Street, Gainsborough, DN21 1LP
Victoria Court, Valley Road, Meersbrook, Sheffield, S8
Manley Park , Leigh, Lancashire. WN7 2RS
The Barge Arm, Gloucester Docks, Gloucester, GL1 2DN
The Yard, Sophie Road, Nottingham, NG7 6AA

Overseas property
If you are looking for quality overseas property you need look no further. Whether you want discounted French property with guaranteed rental returns, land in central Florida or something a little more exotic we can help. Our overseas property department is growing fast and we are currently offering exceptional opportunities in the following locations:

France . Most regions
Spain . Many regions
Cyprus - Paphos
Florida . Central and Northern
Brazil . North coast
Middle East - Dubai

Please go to www.propertyforlife.com/discount_prop.php for full details and look out for more great opportunities coming soon!

Please go to www.propertyforlife.com/property/ for full details and look out for more great opportunities coming soon!

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Upcoming events

Over the coming months we will be running a number of property investment academy sessions as part of our ongoing academy programme. If you would like to attend a property academy session please call Laura on 01252 737575 or email laura@propertyforlife.com stating which session you would like to attend and how many places you require. laura@propertyforlife.com stating which session you would like to attend and how many places you require.

Academy Dates
28th April 2007 . Kegworth Whitehouse Hotel, East Midlands
12th May 2007 . The Hilton Hotel, Dartford

For full information go to www.propertyforlife.com/whyinvest/education.html

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Do you fancy a spending spree at one of the UK's leading department stores?

The new look Property for Life referral programme can offer you just that.

All you need to do is tell an interested friend about Property for Life and you could soon have a minimum of £250 in gift vouchers to spend in any John Lewis or Waitrose store.

Quite simply, for each person introduced by you who then purchases a property through us you will receive a cool £250 in John Lewis gift vouchers. If they purchase more than one property you will receive £250 in gift vouchers for each property they purchase. You could soon be well on your way to that spending spree.

Remember, the more people you introduce the more chance you have of grabbing at least £250. So why not tell your friends and family about Property for Life? Make sure they register on-line at http://www.propertyforlife.com/register. When registering it is important that they select the recommendation option in the 'How did you hear about us' section of the form and include your name in the 'other' box.

Please note that the referral programme is on a per property not a per person basis. Please see http://www.propertyforlife.com/services/referalprogramme.html for further information.

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Do you fancy a spending spree at one of the UK's leading department stores?

The new look Property for Life referral programme can offer you just that.

All you need to do is tell an interested friend about Property for Life and you could soon have a minimum of £250 in gift vouchers to spend in any John Lewis or Waitrose store.

Quite simply, for each person introduced by you who then purchases a property through us you will receive a cool £250 in John Lewis gift vouchers. If they purchase more than one property you will receive £250 in gift vouchers for each property they purchase. You could soon be well on your way to that spending spree.

Remember, the more people you introduce the more chance you have of grabbing at least £250. So why not tell your friends and family about Property for Life? Make sure they register on-line at www.propertyforlife.com/register/ and select the recommendation option at the end of the form and include your name in the 'other' box.

Please note that the referral programme is on a per property not a per person basis.

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