Recently I have had a discussion with a friend regarding the pitfalls of dating and the difficulty in finding the right life partner, since my friend and I have an investing and trading background, our discussion took a turn towards comparing dating and marriage to short term trading and value investing; as a result I thought it might be a good idea to write an article comparing both!
The way I am going to compare both would be as follows:
Daytrading vs one night stands
Swing trading vs a short term fling
Value investing vs marriage
Daytrading vs one night stands
Day trading and one night stands have tremendous similarities, a day trader is looking for an opportunity to enter and exit a position (no pun intended!) as quickly as possible, the trader does not care what the company does, what the business is or what it will do, what the trader cares about is to close the day in cash and with a profit.
Contrast that to a one night stand, a man looking to score with a lady overnight, will possibly frequent a bar or a club and he will scan the entourage (or the market!) for a suitable target, he will observe, approach, possibly talk to his target (open a small position), get a feel for a potential hot nightly encounter, if things look good he will ride the position through the evening with the goal of closing his exposure by the next morning latest; his goal is to close the deal with no commitments plus having a fun night, who he was with or what even her name was is not an issue.
The thing with both day trading and one nigh stands is that they really don’t offer a sustainable, comfortable and stable revenue source or an emotional satisfactory relationship, once a day trading position is closed, the next one must be found, and likewise with a one night stands, once the night is over, a new adventure must be found in short order.
Having said the above, some traders and some men love the risk taking both situations offers, they also enjoy the freedom and diversity such a style of life offers.
Swing trading vs Short term flings
Swing trading entails holding a position for a few days or a few weeks, some investors even hold for a few months, but the premise remains the same to get in and get out in relatively short period of time, either at the expected profit target, at a stop loss or if a new opportunity is found; a short term relationship is not much different, the goal is to stay with someone as long as you are having a good time, eventually you will move on, especially if someone more interesting comes into play.
It is true that some swing trading positions can turn into a long term commitment, however this usually happens when the investor can’t take the loss on a wrong call; or is too scared or unable to break up from a short term relationship.
While swing trading and short term dating require more work in terms of research and relationship building vs day trading, it does share the similarity that an exit point is already showing on the horizon from the start of the relationship.
Value Investing vs Long Term Relationship or Marriage
Unlike the prior two value investing and long term relationships require an extensive period of research, comparison, study and analysis to find a suitable target; a value investor will go over dozens if not hundreds of companies before taking a position in a given stock, he or she will generally commit to hold for an extended period of time for “better” or “worse” as long as they believe that they hold the right stock; some value investors such as Warren Buffett will buy a stock only if they think it is worth holding for a life time; and they will exit or (divorce) the position only if the fundamentals deteriorate significantly.
Likewise when it comes to the search of a life time partner, the man or the woman needs to search, meet, discuss and evaluate a lot of potential partners; sometimes the lucky among us may stumble on the right person without much efforts, the same way a value investor may find a hidden gem by accident, generally however it takes a long time to find that right person.
But finding is only part of the difficulty, for a value investor to make significant returns he or she needs to let their profits run, they need to hold for an extended period of time; and they must not be scared out of their positions if the market takes a negative turn; as is the case in a long term relationship the partners need to let the relationship grow, they need to nourish it, sustain it and work on it; they must face difficulties together and share the good times together, they need to keep an eye on their shared future and ignore the noise and the headwinds.
Attributes such as patience, modesty, vision and a relentless focus on fundamentals is the formula for successful long term investing, many of those same attributes are key to the construction of a successful long term relationship; the best stock is that stock that will continue to rise and pay you dividend through your lifetime, exactly as a joyful and successful marriage would do.
Finally for those of you who can’t make their mind between a couple of ladies, you might want to consider pair trading, just remember however, unlike a generally reduced risk with pair trading vs a directional position, pair trading in relationships could be very hazardous to your health!.
Disclosure: Disclosure: I am long "my wife"