Property Investment
2 min read
Author: Andrew Nicol
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Roger Federer won over 80% of his matches.
He was one of the greatest tennis stars of all time.
And yet, he only won 54% of the points he played.
I was walking on my treadmill in my garage, YouTube playing to break the boredom.
And then I heard that stat. A light bulb went off in my head. And I suddenly thought: ‘That’s exactly how investing works.’
If you can win 54% of the points you play in tennis.
Then (statistically) you win around 60% of your games.
Winning 60% of your games … turns into winning 73% of sets.
And if you win 73% of sets, that compounds into winning 83% of matches.
And if you win 83% of your matches, you become a world champion.
I call this the Roger Federer Effect … here’s how it works for investors.
Have you ever got obsessed with investing?
So you log into your bank app every day to see if your property value has changed.
Or maybe you log into Sharesies to see how much money you made yesterday.
If you’ve ever done that … you’ve probably been disappointed.
That’s the Roger Federer Effect in action.
Because on any random day, there’s only a barely-better than 50/50 chance that your shares go up.
Take the S&P 500. What’s the chance that you get a positive return? It’s:
But that’s all based on an (almost) coin flip chance of it going up on any day.
That small edge compounds into something much, much bigger.
So if you log into your Sharesies (or other investing) app each day and say, ‘it doesn’t look like it’s doing anything.’
That’s like looking at a handful of points played by Federer and saying, ‘he doesn’t seem very good. He only wins about half the time.’
Those small edges add up to much more.
It’s the same with property
If you look at NZ house prices, there’s a 68% chance that house prices go up in a month.
But over a year, house prices go up about 82% of the time.
Over 5 years, the market goes up about 98% of the time.
Over 10 years, the chance is even higher.
In the short term, there’s so much more noise. But in the long term, things become a lot more certain.
Last week, an investor said to me, “Andrew, you talk about house prices going up. But, that’s not my reality when I check my ANZ app each month.”
And that’s right. That’s not your reality.
Because the reality is that over the long term, property prices tend to go up.
But over the short term … a day, a month, even a year or two … they jump around. A lot.
That’s the Roger Federer Effect in action.
But what would Roger do if he lost a point? Would he beat himself up? Throw the racket? Quit the game?
No, he gets ready for the next point. Because you’ve got to play many points to win a match.
It’s the same with investing.
So, stop watching every point. It’s the final score that counts.
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
