What Happens When You View Relationships Like Investments? (And Vice Versa)
Dawn Santoriello, CFP?
#1 Best Selling Author! Manifest and Invest Live You Best Life Get Your Money Right & The Spiritual Path to Prosperity...The Truth About Money Revealed. Helping You Manifest and Invest Your Money
Though Valentine's Day has come to symbolize a celebration of romantic love, it can also be measured in economic terms.
The National Retail Federation estimated that more than half of U.S. adults celebrated Valentine's Day last year, spending a total of $23.9 billion.1?That breaks down to an average of $175.41 per shopper. While this is roughly one fifth of what each person spent for Christmas gifts, in the case of Valentine's Day, the entire expenditure is typically all for one individual.
People believe that satisfying romantic relationships are worth spending money on. And, in fact, psychologists have sought to use the language of economics to describe people's assessment of what they receive for their relational investment.
According to counseling site OurRelationship.com, in the 1960s principles of sociology, anthropology, and psychology were combined with B.F. Skinner's behaviorism to describe social interactions in economic terms.2?This new model was called social exchange theory. The theory's fundamental assumption is that people assess how much a relationship will cost them in time, money, commitment, sacrifice, etc. versus how much they are likely to get out of it in terms of having their needs and desires met.
According to social scientists, this assessment process can be reduced to formulas like SATISFACTION = OUTCOME - Comparison Level, and DEPENDENCY = OUTCOME - Comparison of Alternatives.
One of their key findings is that, when it comes to these close relationships, people want a substantial return on their investment.
"Having positive experiences with intimate relationships is not enough, we seek to have the positive outcomes from intimate relationships exceed what we think we deserve." If that return is not forthcoming, people begin to look for alternatives.
Many investors take this exact view with their money. They approach the market with the attitude that they?deserve?a certain return. To achieve this they might pick stocks they think will go up in the near term. They might make a guess on commodities. Or they might buy into a fund with a recent track record of impressive growth. Whichever they choose, they’re probably not going to be satisfied unless they receive outsize gains.
As a knowledgeable investor you can see right away what the problem is. Barring extreme luck, this kind of short-term thinking is more likely to end in losses rather than gains, while generating unnecessary transaction costs.
In the same way, a person who seeks a romantic relationship where they always get much more out of it than they invest is most likely to be unhappy. And like a stock speculator, they are likely to move from alternative to alternative at a high cost.
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While a long-term, committed relationship such as a healthy marriage is worth far more than any portfolio, there are some parallels with prudent investing. Wedding vows talk about sticking it out in sickness and in health, for richer or poorer—the idea being that there are bound to be difficult times. You don't quit when the honeymoon's over.
In the same way, the best chance for success in saving for retirement is to go into it with eyes wide open. Don't rely on an endless bull market. Expect some down periods along the way.
For both relationships and investing, staying committed helps position you to enjoy the greatest long-term satisfaction.
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Disclosure:
The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.
Sources:
Disclosure:
The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.
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2 年Love this! Great article!