Investing Mindset: Ignoring the Noise of Negativity
As a kid growing up there was a cartoon called the Adventures of Gulliver. One of the characters is Glum, who offers only negativity whenever his team faces a challenge. His comments follow a running theme, "It will never work," "We're done for," or "We're doomed". As a kid I saw this character as comedic relief. But as I got older, I realized this is actually a common mindset, particularly when it comes to personal finance, investing and pursuing financial freedom.
Trust Due Diligence, Not Opinions
For investors, it is important to tune out this noise of negativity. When conducting due diligence, do not accept the opinions of random people. Seek the advice of experts or experienced professionals. For example, when we put a contract on one of our first investment properties, we struck up a conversation with a person who was renting a unit in the building. She asked what we were paying for the property and we told her. She shook her head and said the price was way too high, saying, "you're getting ripped off." We ignored the comment. We had done our due diligence and knew it was a great deal. If we had listened to her would have missed out on a property that cash flowed right away and made a huge profit when we sold it a few years later.
Negativity Can Derail Success
It takes a successful mindset to reach financial freedom and an important component is ignoring this noise of negativity. Over the years we have had many people tell us rental properties will only lose money. Often these investing horror stories come from people who have never owned an investment property. Occasionally it comes from someone who has only owned one property and it did not work out for them. If an investor quits after the first failure or bad experience, they cannot expect to be successful.
The failure could be bad timing or mistaken assumptions, but figuring out what went wrong is the first step to getting better. There are many ways to turn around a failing investment. Learning how to make these course corrections improves the likelihood for success with this investment and the next one.
But, this process requires an investor who is willing to admit they made mistakes, and people with a lot of negativity are often unwilling to do this. It is much easier to blame something or someone else. I have had first time investors with a failing property ask me for advice. When I offer options, they dismiss each one saying, "that won't work". The investor continues on with the same failing strategy. In contrast, the most successful investors I know are the ones who are willing to pivot when things are not working. They are also quick to share the mistakes they think they have made. This is how they got to be so successful.
Bad Experiences, Make Better Investors
Every investor makes mistakes and every investor will have bad experiences. This often happens when an investor exceeds what they know and over reaches or makes missteps. It is part of the process and every investor will eventually lose money on a deal. These bad experiences are how investors get better. It certainly helps when they can learn from others' mistakes and not pay the financial consequences of learning the lesson. But investors who succumb to the noise of negativity for fear of making mistakes miss out on these lessons. They also miss out on achieving their financial goals.
Remain Curious and Flexible
In addition to accepting one's own mistakes, investors can improve their talents by remaining curious. This open-mindedness and curiosity builds on existing knowledge, helping investors hone their skills. The negativity crowd is usually not open to this approach. Every successful investor has heard from people, "I tried that approach and it does not work" or "That might work in your area, but it won't in mine." These are all limiting beliefs that hold people back. There is usually a solution, but it takes some digging and flexibility to find it. For those who succumb to negativity, it is easier to blame the asset class or a location than it is to admit they have more to learn if they want to be successful.
Some People Are Trolls, Ignore Them
With the rise of social media there are some people who love to be a troll. They derive their dopamine hit by spreading negativity. These people are very bothered by someone else's success, possibly driven by their own fears of taking risks. Unfortunately, these trolls are a waste of time and it is best to ignore them. Investors should focus their attention on people who are supporting them to achieve their goals or fellow investors who are seeking to learn and get better.
Personal finance is closely intertwined with maximizing happiness. If you want to be a successful investor ignore the noise and opinions of the negative crowd. If you want to be happy in life, do the same. Also see the article Going Against the Heard for developing a mindset for success. For more detailed information on investing and creating a plan for financial freedom see Become Loaded for Life and the 10 Stages Workbook.