Have you ever wondered why so many of the stories you hear about investments in the stock market are sad ones? Status-based thinking may give us a clue. Most stories seem to be about significant losses rather than gains, unless the individual is an expert investor and focuses on that activity as a life priority. It turns out smart investing involves not only when to buy, but equally important, when to sell. Most amateurs buy and then forget about that particular stock – until they need to take the money out for some reason or other, totally unconnected to the stock’s performance.
Why is it so hard for us to sell a stock we’ve owned for a while? If it’s doing well, then we’re inclined to keep it, as it feels successful. If it has dropped in value, then we have to wait till it regains its “true” value. If it hasn’t done anything – up or down – then we wait to see which direction it will take. No matter what its activity, we find no reason to sell. That’s stock market investing. Stay with the status quo, no matter what’s happening around us.
So what does it mean to invest in our relationships?
Just like staying aware of others’ perspectives in business interaction, investing with awareness means staying aware of the marketplace information on your stock on a moment-to-moment (or at least week-to-week) basis. Just as there is a time to buy, there’s a time to sell. This type of investing takes more time and effort, but it’s much more profitable.
Also, we tend to be more attracted to high-risk investments than to sensible, conservative ones. According to the Consumer Reports Money Advisor, “Our brains experience greater pleasure (via a surge of dopamine) at the prospect of making money when there are high risks involved than when it’s a sure thing. The reason is that the dopamine rush corresponds with the anticipation of making money, not actually getting it.” Emotions often get in the way when it’s time to sell as well. It’s still hard for people to sell a stock that has dropped in value, even if they are aware of the timely changes in the marketplace. There’s something about their brand that hates to sell at a loss. Neuroscientists have a name for this – “loss aversion.”
Selling at a loss brings on some anxiety, which results in the inability to make a logically processed decision. The fear of weakness, in other words, overshadows the logical decision-making process to get out of a bad deal.
Many unfortunately succumb to the same fear when it comes to professional relationships. Know when it is time to cut your losses and move on. Don’t allow ‘risk aversion’ to drag you down even deeper.
To learn more, read the revised and updated Relationship Economics paperback edition with 40 percent new content, including an all-new chapter 10 on social media and business relationships (Wiley, Feb. 2011).