“It is a wealthy person indeed who calculates riches not in gold but in friends.” — Jim Stovall
As a trusted advisor who inspires, educates and helps people to make smart choices about their money, I have found that women’s communicative tendencies and their ability to form great friendships can lead them to make great investment choices. Sound investors often have great circles of friends. This is because they intuitively apply the philosophy of selecting good friends to the art of making good investment choices. Here are ten observations of what friendship and investing have in common:
1. Friends, like investments, must add value to our lives. A good investment, like a good friend, does not drain us. Even though friends and investments will inevitably experience life’s ups and downs, their potential to help us experience what we value most in life is ever present.
2. Friends, like investments, must be able to stand the test of time and weather all types of storms. When markets are up, many friends and investments will perform well, but it is in the difficult times, the down markets, that we really see what our friends and investments are made of.
3. Friendships and investments must be transparent. Never invest in something or someone that you don’t understand.
4. Friends and sound investments may lag, or sometimes fall short of our expectations, but they never disappoint us in the long run.
5. Friends and investments must be diverse. Variety is essential. If all of our friends look the same and behave the same, life may be boring at best and stifling at worse.
6. Friendships, like investments, must be nurtured, monitored, and when appropriate, rebalanced. Set them and forget them is a recipe for disaster. Always take care of and pay attention to them.
7. Friendships and investments should be acquired over time. “Dollar cost averaging” is a term used to describe adding to one’s portfolio on a periodic basis. Systematic periodic investing ensures that we do not buy all of our investments at the same price. This can sometimes be a helpful strategy in a volatile market. As we get older, our tastes may change and our investments and friendships should reflect our maturity.
8. A “sell discipline” is a phrase used in the investment world that defines the criteria that one should use when determining the right time to get rid of an investment. Good judgment is also required to recognize which friendships should only last for a season versus those that should last for a lifetime.
9. “Buy low, sell high” is the goal of investors! Like an investment, never let a friendship end on a negative note.
10. Having the guidance of a mentor or an advisor can be helpful with the selection of investments just as good people will often lead us to more good people, which eventually becomes wonderful friendships. Women are great at asking for directions when needed. It’s no wonder women make great investors!
Kim Bourne, CPA, CFP, EA, a lifelong New Yorker, graduated from Pace University. She is the owner of Playfair Planning Services, where she and her team help successful entrepreneurs and professionals make smart choices about money.