“Stop-loss” and the art of investing in relationships

Life is short and we are all “day traders” looking for bargains on the market- Walking around. Offering our limited time here in exchange for a shot at earning a livelihood, making meaningful relationships and soaking up experiences.

Not surprising then that everyone is out to get the best “return-on-investment”, and the folk who come out winners are the ones who care about “fundamental analysis” of their relationships and don’t look at the market as a big casino where luck and karma play a part.

Okay at the outset, let me put down a disclaimer that I have minimal to no experience dabbling in the stock market, and cannot be termed a “thought leader” in the field by any stretch of imagination, however I’m proud of the strong personal and professional friendships I’ve built over the years and feel I’ve unconsciously used the same principles – and it’s helped.

So without further ado, let’s get familiar with a few trading terms that should get us all on the road to profit booking in our relationships.

Followers of “value investing” believe that a share price should equal the intrinsic value of the target company’s share. This approach can be used to evaluate our investment strategy in relationships too. Many of us (usually the young, who have a long life ahead of them) have a “trader” mindset going into relationships – “Go in. Make a quick “kill”, and exit” ….. others approach relationships with an “investor” mindset and have a longer horizon, spend a lot of time doing “fundamental analysis” to ensure they carry minimum risk and usually are ready to amortize their gains if required over a period of time.

The key to happiness is to have a portfolio of relationships with both a “growth” and “value” horizon balanced out based on your risk appetite.

“Stop-loss”: This refers to an ”Exit” strategy when things don’t seem to be going as planned. All of us have experienced people who follow you when things are going up, but have a low tolerance for tough times and vanish into thin air when they see a faint grey cloud coming around.

Having said that, it’s important to have an “Exit Strategy” for all our investments and not having one will put you in a situation where you jump into a relationship as a “trader”, crank up losses quickly, pump in more good money behind the bad money to bail out (aka:”fallacy of sunken costs”), get stuck, and decide to become an “investor” and hold on to the stock. Look around you- are you stuck with these types of relationship investments?

“Resistance-Support” levels: Look at the data stupid. Its important to evaluate the universal “high-low” bands that is at the core of any investment. What is an acceptable price to pay for getting into that relationship. Are you paying more than you bargained for? It’s okay if you do, just be sure your risk-to-reward ratio makes sense and you are are cautious when there a high probability that you’re going to lose BIG? Step back, take a good look at the data, but trust your instinct. Also be ready to walk away.

Portfolio: Looking at out relationships like stocks and evaluating them periodically is critical to ensure you are successful as a trader and/ or investor. Remember though that investing in relationships should only be part of your “happiness strategy” and make sure you focus equally on your Career, Health, Wealth. Spirituality.

Happy investing!

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