Continuing our education on the mindset of the astute investor, we want to discuss Maslow's Hierarchy of Needs ( say what??).

Maslow's hierarchy of needs is a motivational theory in psychology comprising a five-tier model of human needs, often depicted as hierarchical levels within a pyramid. ... From the bottom of the hierarchy upwards, the needs are: physiological, safety, love and belonging, esteem, and self-actualization.

This framework that was first proposed by Abraham Maslow in 1943 can help you understand your own needs, and it also can help understand why property investment is continuously an investment winner.

Property is shelter, it is the most basic of human needs.  Without shelter we cannot feel safe or even cover off our most basic of the physiological needs.  Housing goes along with food and water. Almost everyone needs shelter as an essential item.

SInce property is a basic need, it performs extremely well as an investment vehicle. If we look at other types of investments you will see that the ones that cover basic needs also perform well. Why? Because of supply and demand. There is a huge demand, and when it comes to supply of housing, it is a complex situation, we can’t just grow new houses, or put them on a production line. We have to work within the limitations of land availability, materials, labour etc.

Now we aren’t saying other forms of investment don’t work well, if you had bought a Van Gogh in the 2nd half of last century you would have made an incredible return and your family would be high-fiving you for making such a wise decision.  But Art falls in the higher echelons of the hierarchy of needs.  It could fall in Esteem Needs or Self Actualisation.  The artist is usually doing the art as a form of self actualisation and the purchaser is usually doing it for esteem.

Here is the thing, the population gets smaller as you go higher up the hierarchy, there is a very small percentage of the population that will ever get to true self actualization.  So the supply and demand of investments that manifest themselves in the higher rungs of the pyramid become a game for those who operate in those rungs.

If we look at the stock market over the past 20 years, the growth has been around food chains and tech companies. Apart from the basics of food production such as grains, meat and dairy, the food companies that have skyrocketed have been all about the third tier, belongingness & love needs. This is really where most tech companies fall as well. Although we have seen a move to categories wifi as an essential human need. It is a core large food chain and tech companies are bringing people together and offering a form of connections. Teenagers still congregate at KFC on a Friday night, because it is an easy place for them to gather. Facebook and IG are all about finding your tribe and getting a sense of belonging.

But getting back to Property because we love it. People need a place to live, and we are all conditioned to prioritise spending money on it. Food and housing usually takes up around 60%-80% of people's income.

So when we start to contextualise the reason for property investment as an investment vehicle, it's easy to understand why so many people make their money through it.

HOUSING IS NOT A TREND

When we look at tech investments, or other higher rung investments, they can become volatile due to where they fall on the hierarchy of needs. There is a lot more competition to get the attention of the people who are looking for their physiological needs met. There is a lot more room for trends to influence the value of the investments. There is also a lot more room for technology to disrupt the investments in these areas. Take Blockbuster video. If you were investing in it in the 90’s, because DVD’s were so hot and people loved to watch a movie with their kids on a Friday night with Pizza, you would have thought you were golden. But along comes streaming services, and DVD’s became irrelevant. You could not set and forget that investment, you need to be sharp and understand all the trends, technological advancements and social shifts. It becomes a complex game of strategy.

Although, historically property can be slightly affected by the economy, there aren’t big disruptive trends that can make them obsolete overnight. Especially if you select hard working suburbs that are not solely existing because on an industry ( mining towns)

LOOK AT YOUR NEEDS AS AN INVESTOR

As an investor you are probably going to be investing for a mix of reasons. People often are investing for future safety needs, such as their retirement. No one likes to think of themselves as a poor oldie, not being able to afford to put the heater on in winter. Others invest in property for belonging and love. We see a lot of parents invest with the goal to be able to help their children - for example paying for university, or weddings.  They love their kids and want to help. They prioritise having a strong family unit. We also see people understand that property investing can fulfil their self esteem needs. They want more, they want the holidays, they want the cool cars, they want the Gucci handbags, they want to be able to take advantage of business opportunities when they are offered them, and they know property investment and the returns will help leverage and fulfill their adventure for life.

And of course there are people who play so big that they want to make enough money to be able to change the world. Philanthropic causes, influence and change are usually in the realm of those who are self actualised enough to know they can create real change, they have a vision of the future and they back themselves to be able to execute it. Part of their mission is to have money to be able to help. Look at people like Tony Robbins, who uses his skills, business and investment to help people in huge numbers.

As an investor, you might have a mix, or it might be that you want to start off covering your basic needs and then work your way up. Whatever your needs are, it is great to take some time to understand what they are and where they fit in the pyramid. Understanding them, really can help you understand what type of investment vehicles you use.

As far a we go, we love property, because it is such a solid stable workhorse of an investment, because we understand exactly where it fits in the hierarchy of needs and we know it can provide for all of our needs.

Hit us up if you have any questions.