What Valentine’s Day Teaches Us about Investing  

Today is Feb. 14, which in America is also known as Valentine’s Day.

This is the day we’ve designated to celebrate our romantic relationships. It also is a day where many people spend a lot of money on things like flowers, candy, teddy bears, champagne and dining out… all in an effort to revel in their relationships.

While I get this impulse, for me, Valentine’s Day also serves another function. For me, Valentine’s Day can be used as a pedagogic tool that can help us learn and understand some of the key principles involved when finding the right investments.

You see, when it comes to matters of the heart, most of us feel as though this part of our lives is directed and governed by intense emotions. These emotions are essential to human beings, and life would be rather empty without them. Perhaps that’s why the longing for love in all its forms (romantic love, love for a child and immediate or extended family, love of career, money, health, etc.) is so sought after by virtually everyone.

Yet my view here is that the intense amorous emotions we feel on so many fronts are a direct result of our rational (and sometimes irrational) needs. For example, the search for romantic love is based largely on our biological need to reproduce. That need burns deep in most humans, and it compels us to throw ourselves headlong into the search for the right mate.

When it comes to investing, our rational need is to protect and grow our money so that we can use it to fund our retirements, to live a life free of financial stress or to be able to live a more prosperous and luxurious existence.

And much like we search for the right romantic partner and life mate, proper investing involves searching for the right stocks, exchange-traded funds (ETFs), mutual funds and other asset classes that fit our rational needs.

In the case of a romantic partner, most of us want the excitement and passion of a physical, emotional, even spiritual connection. Most of us also want the safety, stability and security of a rational spouse who can provide us with the emotional comfort we need to get through life’s inevitable pain.

Of course, most of us know that combination is not very easy to find in one person. Yet if we’re lucky enough to find it, we have to cherish and nurture that find — and I think that’s what Valentine’s Day is all about (at least, it is for me).

Now, when it comes to your money and investments, the right stocks, ETFs, mutual funds, etc. also aren’t very easy to find.

To find the right asset mate, you have to define your rational goals, which includes identifying your time horizon, assessing your risk profile, evaluating your overall financial picture and determining a host of other considerations.

It is only after you know what you want that you can find the right “investment mate.”

For example, if you are looking for a stable, safe and secure life mate, then you usually don’t want to go for the “bad boy” or the “wild girl” type. And if you’re looking for a stable, safe and secure investment, then you don’t want to buy high-yield junk bonds or bitcoin. Here you would be better off with a bond fund and/or dividend-paying equities.

Of course, there is one thing that investing has over the search for that perfect Valentine, and that is diversification. Every investor can construct his or her portfolio with a combination of equities, fixed income and alternative assets that fit his or her rational goals. But unless you have a very open situation, it’s hard to “diversify your portfolio” when it comes to mates.

Score one here for investing over the search for the perfect Valentine — although I doubt any of us would trade the perfect spouse for a winning investment portfolio.

Fortunately, you don’t have to choose one or the other. You can celebrate both by making the right investment choices for your rational goals — and by finding the right person to be that special Valentine.

So, if you have that special person, celebrate that today… and every day.

Ben’s Beautiful Wisdom

“Either write something worth reading, or do something worth writing.”

— Ben Franklin

When it comes to admonitions of wisdom, the genius of Ben Franklin has special standing for me. In fact, the above quote operates for me on both levels. That’s because I’ve always strived to write things worth reading, and I’ve also always strived to do things worth writing about. So, to Ben’s beautiful wisdom, I say, “Why not do both?”

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.