The biggest weakness of property buyers

Lack of experience? Insufficient fund? Age disadvantage? Resident status? Non 1st-time buyer?

Not really. For any of the above problems, there is still a way out.

The biggest weakness of property buyers is their lack of independent thinking.

It is the lack of capability to think for themselves, or the absence of the ability to differentiate whether the information being presented is true or false.

Recently, gold buy-back schemes are in the limelight again after the Genneva gold trading company runs into hot water. Many victims in this region are attracted by the promise of good profit, high commission and buyback at purchase price.

There are so many ‘safe’ ways to invest in gold – mint of different government, financial institutions, local banks and reliable bullion companies – all at a rate more favorable than that offered by gold buyback companies.

Why would people still want to risk buying from companies with no track record, apart from aggressively pushing an unproved scheme?

Before the victims part with their hard-earned money or even life-time savings, how many of them fully understand the philosophy behind investing in gold? Can they tell the pros and cons of buying physical gold, paper gold and bullions? Have they asked how to confirm the physical storage of their gold bars in the company’s vault? Do they ask how audit is done to prevent the company selling the same gold bars to different customers?

Everyday we are bombarded with different money-making ideas, investment schemes and get-rich-quick programs. (By the way, I have yet to know anyone who really becomes a millionaire by joining any of these ventures. And I personally have not met any successful investor who lets slip of what venture he is currently engaged in, except for the few partners he trusts.)

Sadly, not many can tell the differences of (or care spending time to find out) a sound investment company from a bad one. Until we wake up one day to find some names put under Monetary Authority of Singapore’s Investor Alert, or some companies being raided by the Commercial Affairs Department.

Many people invest under ignorance, greed, fear, insecurity, kiasu or herd mentality.

Without any reference from individual observations and experiences, they are not able to make any individual judgment. They accept whatever they are told and won’t question whether the investment concept really makes sense. They simply do not have independent thinking.

Instead of seeing the ‘risk’, they play ‘safe’ to go along with the thoughts of others.

They may take hints from spokespersons in the media, without the ability to read between the lines from the spokespersons’ background. Their unquestioning trust makes them believe in everything presented in front of them, including those property launch ads, TV commercials and sales brochures.

When they attend property seminars (doesn’t matter whether they are free or with a thousand-dollar price tag), they believe in everything the speakers say. The seminars all end with a similar conclusion these days: With so many cooling measures, money is no longer in the Singapore market. There is no choice but to buy overseas projects at the end of the seminars.

Credibility and past records are seldom questioned. Anyway, no one will ask why those high-return overseas projects are not already snapped up by the locals; or conduct a market research on alternative projects near the surrounding areas in the city; or run detailed ROI calculations under all possible scenarios; or check the actual return of all the company’s previous investment opportunities.

Donald Trump has warned investors in his book TRUMP: Think Like a Billionaire – Everything you need to know about success, real estate, and life,

“Just because you don’t understand something doesn’t make it a good investment … the words ‘new venture’ sound to me like a loan that will never get paid back … They want your money, pure and simple, so they’ll have a chance to make money.”

We are taught basic subjects of languages, mathematics and science since young. Maybe we should add Independent Thinking as a compulsory subject in the syllabus. We should learn more about human psychology, practice questioning of conventional wisdom, and conduct debates with conflicting thoughts.