In the mutual funds universe, you have index funds on one end of the spectrum, and “special situation” funds at the other. The former simply track the market index, rising and falling in tandem with the market’s peaks and troughs. The latter, on the other hand, attempt to home in on unique upside opportunities and gain alpha.
As a property investor, you should try as far as possible to emulate the latter rather than the former. I draw inspiration from strategies taken by the fund manager behind a special situations fund I once invested in. He looked for themes that were on the uptrend, then dug beyond the obvious to seek out a more targeted vehicle for harnessing that trend. For instance,when he felt that international trade was set to boom, instead of banking on shipping stocks, he bought into ports, as the latter represented a more finite resource – you can have as many ships as can be built, but ports are strictly limited by geographical and administrative factors, amongst other constraints. Similarly, when he sought a means of investing into Asia’s growing need for infrastructure, he avoided construction companies, and went for the one key player providing the cranes to the many construction companies. This all took place years ago, but I reckon there is timeless wisdom in the investment style adopted.
