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Investing and Psychology

Discussion in 'General Investing Discussion' started by Triu, 22nd Aug, 2007.

  1. Triu

    Triu Well-Known Member

    Joined:
    1st Sep, 2006
    Posts:
    161
    Location:
    WA
    Hi i think we should start a thread on Psychology and how it affects us to make decisions which may be based on our own fears.

    Since i am writing this i will start off. My pet fear is leaving my boring government job to go and study for further 6 months or so without pay and then start another job probably 100% commission based.

    My concern is getting my head around not having enough money to pay for my expenses even though i have a Line of Credit available. Can anyone give me some advice if they have done what i want to do. I am so close to walking out and doing it just have to check my numbers once again to see if i have enough money in the LOC to do it.

    Also what others fears or doubts they have. I would be interested to know...


    thanks for any help!
     
  2. voigtstr

    voigtstr Well-Known Member

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    Hobart
    What are the numbers? If the numbers in an excel spreadsheet said do it, I'd do it. I'd also want to make sure though, that I had a nice big buffer of cash, that could pay your expenses for 6-12 months if you didnt get the returns you expected over that time frame.
     
  3. Tim

    Tim Well-Known Member

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    Location:
    Lismore NSW
    Triu,

    I spent 4 years in a Canberra govt job wondering how to 'break free'. That was 20 years ago and I didn't break free at all, I rode through it and progressively made my life better in incremental steps rather than a leap from security.

    My life now is completely different in all ways - so think carefully about what you are thinking of doing.


    For some reason your situation sounded similar to mine - I use to think about things a lot about safety, security, being free, taking risks etc, it is all different in hindsight.

    PM if you want.

    Tim
     
  4. voigtstr

    voigtstr Well-Known Member

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    My pet fear is not having enough money in retirement to live on.
    My reaction to that fear is to pay off my consumer debt, by the end of this year, and buy another property by end of 2008. (and then keep on buying properties as often as possible thereafter)
     
  5. Rob G.

    Rob G. Well-Known Member

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    Location:
    Melbourne, VIC
    You really need to view your boring job as a significant asset being a safe income stream with which you can fund other investments.

    In time, the other investments will grow and maybe you will develop skills to branch out into a business.

    In the meantime don't kill the goose that lays the golden egg just because you have low personal satisfaction, and great ambition.

    Your time will come ...

    Cheers,

    Rob
     
  6. islandgirl

    islandgirl Well-Known Member

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    Location:
    Middle of beautiful Moreton Bay, Qld
    I'm of the same opinion as RobG. Whilst it may be a boring job it is offering you the security of a regular income. If you can use that regular income to increase your investment focus and use some of the time at your boring job to invest then your boring job becomes a useful tool.

    However in saying that I have been in the position of a really boring position and it was soul destroying. I wish I had the investment focus I do now, then I would have put some of my boring day to better use in the office (working for myself!)
     
  7. Dr Lobster

    Dr Lobster Well-Known Member

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    Location:
    sydney nsw
    Oh, I did that, chucked in a job without another job to go to, lived off equity for 6 mths, supported my family, paid my loans, and did a lot of surfing and other stuff.

    It was awesome !!!

    If the numbers are cool and yar built in an appropriate contingency ie ya mite need a new board after you have snapped one :) I say go for it.

    And your doing it to study, I just wanted to be a bum for a while.
     
  8. Rob G.

    Rob G. Well-Known Member

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    Location:
    Melbourne, VIC
    Yeah I spent a long time rehearsing my speech where I told my boss exactly what to do with his job.

    I still found it hard to say no when he asked me to return & contract part-time, i.e. same crappy tasks but in even less time-frame without benefits.

    But that euphoria is short-lived when you have a family to support.

    MOST BUSINESSES FAIL IN THE FIRST TWO YEARS.

    Think about it ...

    You have to risk your own home & family's future as borrowing security as no bank will touch you without an established business. You have to take on fixed costs of leases etc, plus employees, stock, licenses, etc..

    You have to earn enough to pay your business debts, reinvest enough to grow your business (otherwise you go backwards) AND pay yourself enough to maintain your family. And what about holidays, super, sick leave, Work Cover etc ... ?

    That is a HUGE step to go straight from 100% employee to 100% business person.

    I much favour growing a small venture on the side - fed by your nice safe & boring employment income. Make your mistakes while they are small - AND LEARN !

    You will get plenty of time to rehearse that speech for your boss ...

    It is the same with investments. The compounding power is robbed by your living needs so you must reach a critical mass to be financially independent.

    All these published long-term investment returns assume all dividends reinvested. The ASX 100 average returns over the years is a myth because it is not the same 100 companies over time.

    Most of the Blue Chips over 10 or 20 years have either faded out of the ASX100 or failed or been taken over & delisted. Just as importantly for portfolio management as picking winners is avoiding losers which an index hugger is not allowed to do !! So don't rely on published historical data for your leap of faith.

    I'm getting worked up because there are plenty of Franchisors out there who will happily take your money and sell you into a 'business' that will barely give you subsistence living. Makes you wonder about the Trade Practices Act ?

    Talk to a Financial Planner or Accountant ... just for a bit of basic budgeting & a healthy dose of reality on your timing into a business.

    Cheers,

    Rob
     
  9. salsa

    salsa Well-Known Member

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    23rd Oct, 2005
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    Location:
    Brisbane
    If a government job, it is quite possible to ask for 6 months leave without pay to sus out how things are first - If all goes well then quit else come back ?