The Four Philosophies to Rapidly Growing your SMSF
I have seen so many clients purchase the right property in their super fund and so many purchase the wrong property in their super fund. I'm going to tell you the secret of how you buy the best property for your super fund. If you get it right, then your retirement funds will soar and you can look forward to a happy and secure retirement. BUT if you get it wrong, it's not too late to fix it so you can correct the problems and grow your super.
Each week for the next 4 weeks I will be sharing with you how to do this. So keep reading and keep learning. The best investment you can EVER make is in your own knowledge.
I have created four
philosophies for rapidly growing your SMSF. These philosophies are not based on
academic theory nor on copying ideas out of an investment textbook or magazine.
These four philosophies I have created are based on more than 20 years’
experience that I have had in helping business owners and investors in my
accounting practice. In those 20-plus years, I have observed, helped, and seen
the best and worst of what my clients have done well and what they have done
poorly in terms of investing and in managing their superannuation. I’ve taken
this vast amount of first-hand knowledge and experience and have condensed it
into what I call the Four Philosophies.
Whenever one of my clients
lost money or made money, whether it be in their superannuation, in shares or
property, or in sophisticated investments, I have taken intricate and detailed
notes on what they did and exactly how they did it. From being involved in
hundreds of client meetings, reviewing truck-loads of investment transactions
they have done, and scouring thousands of pages of detailed notes, work-papers,
and records that I have taken, made, and analysed, I have found four common
strategies that exist in nearly all of their investment decisions. Clients
following these four strategies or philosophies have made significant
investment gains where others have failed. I have boiled down this accumulation
of knowledge into a concentrated source that I am going to share with you
called the Four Philosophies for rapidly growing your SMSF.
These four philosophies
should be the bedrock that surrounds, protects and grows your retirement
fortress. They must form the basis of every investment decision that you make
when managing your retirement savings. They must become the DNA upon which you
grow and protect your retirement savings.
I have collated and curated
20 years of real-life financial records to support and prove time and time
again that these work. How? Because I’ve seen the actual results and financial
gains these people have made when following these philosophies. I have the
records to prove it.
Whether or not your
retirement years will be the “time of
your life,” or you spend them watching every penny, sacrificing your
lifestyle or not being able to pay the rent depends on you deciding to make a
commitment right now to follow these four philosophies. A life of backward
reflection is about having no regrets.
The Four Philosophies are:
Philosophy #1 – Live and
breathe the seven laws
Philosophy #2 – Losing money
is unacceptable
Philosophy #3 – Only invest
in High Probability Events (HPE)
Philosophy #4 – Timing isn’t
everything – It’s the only thing
If you graft the DNA of these
four philosophies into your living and breathing retirement plan then you will
have a bountiful, independent, and secure retirement lifestyle.
Philosophy
#1 – Live and Breathe the seven Laws
You need to set yourself up
for success by reading, practicing and adopting the seven laws we have already
covered in this book. Living and breathing the seven laws will set you up for
success. The seven laws are all driven by one outcome: helping you not to lose
money. Nearly every person that I know who has a self-managed superannuation
fund or retirement fund has lost money at some point simply because they didn’t
practice consistently and totally any of the seven laws. The loss of money
could have simply been avoided in 100% of the cases. This is no exaggeration.
If they had simply lived and breathed the seven laws they would have made, not
lost money. Here are some real-life examples:
·
I have seen people lose money by purchasing a
dud SMSF property because they didn’t do their due diligence well. They paid
over $100,000 more for a holiday apartment than what it was really worth.
·
I have seen people lose up to 60% of their
retirement savings when the GFC hit, because they didn’t “Go Back to School”
and fully understand the patterns in the stock market and in the global
financial system.
·
I have seen people lose money in their stock
portfolios because they didn’t see the hidden clues in following how the stock
market moves in relation to interest rates and inflation.
·
I have seen people lose money because they
simply trusted implicitly and completely what they had been told by dubious and
charlatan financial planners and so-called investment advisors.
·
I have seen people lose money because they had
no “Plan B” for how to rescue their retirement savings, savings that could have
been quickly and easily salvaged if they had had alternate strategies ready to
be implemented.
·
I have seen people lose money because, whilst
they had built up a strong retirement fortress initially, through subsequent
neglect and apathy and the typical “she’ll be right mate” attitude, they then
neglected to adopt a siege mentality and, as a result, their once-solid
investment portfolio fell out of favour and plunged in value.
·
I know clients who have blindly followed the
advice of investment advisors and bought property in 2010 in low socio-economic
areas such as Buffalo and Detroit in America, trying to capitalise on the
eventual upswing of the US property market after the GFC. Some of these
properties have only been rented for six months of the year or were turned into
crack houses. The police seem to spend more time there than the tenants.
·
I know people who have answered an
advertisement in a newspaper to buy property in the US, and then they ended up
having to pay tens of thousands of dollars in property back-taxes from the
previous default owner.
·
I know clients who have bought multiple
properties in regional mining areas, paying inflated prices for houses,
believing that the growth in the Seurat Basin would be the answer to all their
financial woes and would make them instant millionaires. Three years later
these properties are now worth less than 50% of what they purchased them for!
Case Study – Friday, 22nd May 2015 – Scott and Julie
I stared
disbelieving at Scott when he told me. I could not believe what he had just
said.
In his
managed fund he had $90,000 invested and for the last three years it had not
grown at all. For three years it had gone nowhere! Yet Scott had admitted he
knew this fact. Every three months for the last three years he received his
quarterly fund statements in the mail, read them and then did nothing about
them. He didn’t care.
That’s
three years wasted in building his retirement fund. With inflation, he was in
fact losing money.
The overarching secret to
rapidly growing your retirement fund is to first implement all of the seven
laws you have learnt to date, because:
1. If you
don’t have a distrusting mindset, and trust all the advice that you are given
by family, friends and investment experts, then you will lose money.
2. If you
are not willing to go back to school and constantly expand your knowledge and
develop your financial intelligence, then you will lose money.
3. If you
don’t choose to build a retirement fortress by having a solid trust deed, and
review and update that trust deed on a regular basis, then you will lose money.
4. If you
don’t thoroughly review and research every investment proposal that you are
presented with, before you invest your valuable retirement savings, then you
will lose money.
5. If you
take as gospel what a property spruiker tells you, that this property that they
have found for you is a “sure thing” and you will make lots of money, without
first doing your property due diligence, then you will lose money.
6. If you
don’t have a Plan B for when your shares drop in value, or you cannot get
tenants for your rental property, or the real estate bubble bursts, then you
will lose more money.
I have seen time and time
again over the last 20 years the exact same scenarios that I have described
above. All of these, without exception, could have been avoided if people had
simply followed my seven laws. There is no magic formula. There is no secret
share-trading algorithm. There is no hidden backroom where the best investors
swap the holy grail of moneymaking commandments. Just live and breathe the
seven laws and you will not lose money. It’s as simple as that.
The instances where I did
lose money myself in my superannuation or in investing in general I can pin
down 100% of the time to myself not following my own seven laws. Did I make
mistakes? Yes I did. Do I regret what I have done? Absolutely. We are only
human. I too have lost money. I can simply say that in 100% of the cases where
I lost money, I did not follow all of my own seven laws.
Those who have made money and
whose retirement savings have grown in leaps and bounds followed the seven laws
in one form or another, and it has paid dividends for them. They now have an
exciting, rich and rewarding retirement life and can live and do what they
want, when they want. Will this be you?
Case Study – Dan & Mary: Lessons Learnt in
Building a Watertight Business
Dan and
Mary had built a strong and profitable waterproofing business that had multiple
offices throughout the State.
Business
profits were ploughed into investment properties in Brisbane and Ipswich, an
outer-lying suburb 30 kilometres west of Brisbane. Prior to the GFC in 2008,
things were going well. Dan was getting plenty of waterproofing work from
builders, and there was a construction boom happening in South East Queensland.
The business phones rang hot, and their bank account grew as a result. With the
growth came more staff, more debt, and more stress.
They had
built a very strong retirement fortress with their SMSF; however, they didn’t
see the warning signs that were looming on the property and construction
horizon. Dan had invested in non-traditional assets in his super fund,
including works of art, rare bank notes, and speculative mining shares. The
demand for such specialised investments could fluctuate immensely.
Whilst
Dan had done some initial research and had “gone back to school” by attending a
few investment seminars and subscribing to a few investment newsletters, he was
only doing the bare minimum and not really mastering the fundamentals of
investing.
He
followed what “celebrity” investment experts in the media were telling him to
invest in without doing too much actual due diligence himself. However the
warning signs were coming loud and clear and the writing was on the wall:
1. They had bought an
investment apartment in an oversupplied apartment market in Ipswich (Go Back to School & Master Your Due
Diligence);
2. They continued to
aggressively expand their operations in North Queensland, believing that the
mining boom would continue and that the surge in new house construction close
to regional mining sites would increase (Create
a Plan B);
3. They trusted that
many of their business customers would eventually pay them. A few large
builders and developers in particular had promised to pay their accounts even
though after six months, Dan and Mary had not seen one cent from these
customers. They simply trusted them too much (Trust No-one & Develop a Siege Mentality).
4. They invested in
speculative, overpriced works of art for their SMSF based on unsubstantiated
advice from an art dealer that specialises in selling corporate art to
investors to then lease them back to their corporate clients to hang in their
boardrooms. This art-dealer had a sweet deal; he would get a cut of the sale
price from the artist for selling their paintings, he would then charge the
purchaser of the painting (in this case Dan and Mary) a buyer’s fee, and he then
took a margin on the lease payments for leasing the painting to a corporate
client! (All seven laws ignored by Dan
and Mary, but followed by the art dealer).
5. There was a looming
construction downturn (Create a Plan B);
A
pattern was emerging that whilst Dan and Mary were ploughing headlong to expand
their business as well as investing in their SMSF, they didn’t follow all the
seven laws.
When
cracks started to appear in their retirement fortress, they chose to ignore
them until the cracks became huge. By then, it was too late. The leaks
eventually became a flood, and the business went downhill. Dan and Mary had to
sell their properties at fire-sale prices and dump the artwork, bank-notes and
speculative mining shares in their SMSF at grossly discounted prices.
I
remember clearly them coming into my office one day. I was very direct in my
words as to the looming downturn in the mining industry and what effect this
would have on the construction industry and on their business. I was also
concerned about the specialised nature of the investments in their
superannuation fund and how easily their market value could fall. I know when
an economy tightens up and spending slows down, exotic investments and
discretionary spending is the first to go. At the corporate end of town, fancy
pieces of abstract art get sold or returned to the leasing company. This is
exactly what happened a few months later. Unfortunately Dan and Mary chose to
ignore my advice. To my surprise, they were quite angry that I had contradicted
their once successful investment philosophy.
A few
months later, I ran into Mary at the post office collecting her mail, and she
looked haggard and stressed out. Two of their paintings had been returned to
them. The corporate client who had rented the artwork was cutting head-office
costs, so they had cancelled the lease. The art dealer could not place the
paintings with another corporate client, as they were all looking to reduce
their own business expenses. Apparently leasing a painting that looked like a
child had painted it wasn’t an essential business expense. The paintings were
then wrapped and placed into storage and have not earned any income for their
SMSF for over 12 months.
Their
other investments had done worse and, in fact, Dan and Mary had lost a lot of
money on the share market. Other collectors of bank notes, feeling the
cash-flow squeeze, dumped their collection on the market, causing a glut.
Consequently, prices fell and Dan and Mary’s collection halved in value in a
matter of months. Their operations in North Queensland dwindled on the back of
the downturn in the mining and resources boom, and their business suffered as
well as their retirement savings.
Live and breathe the seven
laws I have given you. When things are going well and your shares, property and
other investments are growing, pay even more attention to these seven laws. I
have designed these laws to help you to NOT
lose money. They are based on more than 20 years of dealing with people exactly
like Dan and Mary. Turn your back on these laws or bury them in the dark
recesses of your memory and you will lose money, eventually.
