Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 199

The meaning of life and real estate portfolio construction

When constructing a real estate portfolio, you will frequently be confronted with the tricky question: which property should I acquire (or dispose of) next? What I’ve discovered over the course of my investment career is that this is not so much a tricky question as it is a trick question. It’s akin to someone asking you: “What is the meaning of life?”

What started as a straightforward question didn’t seem so straightforward after all …

Chess and complexity

Allow me to digress. Recently my son has taken an interest in chess, so in trying to avoid the embarrassment of regular defeat to a seven-year-old, I’ve begun to immerse myself in a game I know little about.

There are about 10^50 potential combinations on a chess board, a number so astronomical that it’s equal to about 60% of the sum total of atoms in the known universe. So, chess combinations are a plausible proxy for the complexity of the real world, though the latter is indubitably more complex still.

Fitting therefore that Victor Frankl, a Viennese Holocaust survivor and psychiatrist, makes use of the chess analogy in his brief but brilliant book: Man’s Search for Meaning. Frankl argues that asking someone “What is the meaning of life?” is akin to asking a chess grand master “What is the best move I can make in chess?” This is self-evidently a nonsensical question: the grand master will respond by asking for the position of the various pieces on the chess board.

And since every human life is a unique combination of genetics and the “thousand natural shocks that flesh is heir to”, the question should be, “What is the meaning of life for me in this situation?”

The answer will vary considerably from one person to the next. Which is why awe-inspiring meaning for one person may seem redundant, distasteful or outrageous to another.

The fanatics among us will no doubt be dismayed. For them, there is always one right answer and it conveniently applies to all, no exceptions. Black and white answers for a world of infinite shades. “The whole problem with the world”, Bertrand Russell once observed, “is that fools and fanatics are always so certain of themselves, and wise people so full of doubts.”

Enough digression. What does all this have to do with the arcane art of real estate portfolio construction? Answer: it’s far less interesting than the meaning of life but the principles are the same.

Recently, I was asked by a cashed-up overseas private investor what I would recommend as a real estate investment strategy in the current market. I responded by saying that anyone who provided an immediate and authoritative answer to that question should be treated with extreme suspicion. They were likely either a fanatic or a fraud.

Ask some fundamental questions

First, I needed to know where all the pieces were on his chess board. I said I would need to ask him some fundamental questions before I could even begin to answer his question (11 questions overall, but who’s counting?):

  1. What is the quantum he is looking to invest and how quickly?
  2. What is the term of investment? Are there any hard limits on the term or is there some flexibility?
  3. What is the target rate of return? Is there a minimum return requirement?
  4. What is the tolerance to annual volatility in returns or to negative returns?
  5. What are the likely liquidity requirements over the term of investment? Is there a minimum annual distribution requirement?
  6. Does he currently own any real estate in Australia or overseas? If so, what is the current and historic performance of that portfolio?
  7. Does he have any preference or expertise or contacts in a particular sector of the real estate market, such as logistics or office or shopping centres?

A zealot will peddle the same deal to all regardless of circumstance, but the right answer is unique to each investor.

Next time someone asks you what real estate deal you would recommend they invest in – smile, lean in and whisper with a hint of irony: “So, pray tell me, what is the meaning of life?”


Adam Geha is CEO and Founding Director of real estate fund manager EG. The original article is here. This article is for general information only and does not consider the circumstances of any individual.


Tax reform favours apartments and owner-occupiers

Six warning bells against property spruikers

Negative gearing doubts and ATO watches home purchasers


Most viewed in recent weeks

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Too many retirees miss out on this valuable super fund benefit

With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?

Is the fossil fuel narrative simply too convenient?

A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.

Reece Birtles on selecting stocks for income in retirement

Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.

Welcome to Firstlinks Election Edition 458

At around 10.30pm on Saturday night, Scott Morrison called Anthony Albanese to concede defeat in the 2022 election. As voting continued the next day, it became likely that Labor would reach the magic number of 76 seats to form a majority government.   

  • 19 May 2022

Comparing generations and the nine dimensions of our well-being

Using the nine dimensions of well-being used by the OECD, and dividing Australians into Baby Boomers, Generation Xers or Millennials, it is surprisingly easy to identify the winners and losers for most dimensions.

Latest Updates


Superannuation: a 30+ year journey but now stop fiddling

Few people have been closer to superannuation policy over the years than Noel Whittaker, especially when he established his eponymous financial planning business. He takes us on a quick guided tour.

Survey: share your retirement experiences

All Baby Boomers are now over 55 and many are either in retirement or thinking about a transition from work. But what is retirement like? Is it the golden years or a drag? Do you have tips for making the most of it?


Time for value as ‘promise generators’ fail to deliver

A $28 billion global manager still sees far more potential in value than growth stocks, believes energy stocks are undervalued including an Australian company, and describes the need for resilience in investing.


Paul Keating's long-term plans for super and imputation

Paul Keating not only designed compulsory superannuation but in the 30 years since its introduction, he has maintained the rage. Here are highlights of three articles on SG's origins and two more recent interviews.

Fixed interest

On interest rates and credit, do you feel the need for speed?

Central bank support for credit and equity markets is reversing, which has led to wider spreads and higher rates. But what does that mean and is it time to jump at higher rates or do they have some way to go?

Investment strategies

Death notices for the 60/40 portfolio are premature

Pundits have once again declared the death of the 60% stock/40% bond portfolio amid sharp declines in both stock and bond prices. Based on history, balanced portfolios are apt to prove the naysayers wrong, again.

Exchange traded products

ETFs and the eight biggest worries in index investing

Both passive investing and ETFs have withstood criticism as their popularity has grown. They have been blamed for causing bubbles, distorting the market, and concentrating share ownership. Are any of these criticisms valid?



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.