What Online Dating Can Teach You About Investing

Back in my free-and-single days I dabbled in online dating. I figured it was an easy way to meet guys, go on a few dates and potentially find something long term.

After quite a few dud dates, and a few that were slightly more promising, I quickly realised that there is definitely a strategy to successful online dating (however you define success). In fact I became quite adept at evaluating a guy’s potential based on his profile and initial messages.

Even though my single days are behind me(phew!), I’m still using the lessons learned from online dating today when it comes to my personal finance. The principles behind online dating success and investing are incredibly similar and lessons learned from online dating can make you a better investor.

Why Investing is Just Like Online Dating

It’s Time In, Not Timing That Counts

Think you can create your profile on Eharmony and have a marriage proposal by next Sunday? Not going to happen.

Successful online daters know that the longer you are a member of a site, the better your chances of finding luurrve. You can’t expect that the day you join your perfect match is signing on as well. You’ve got to play the long game and put in a bit of time and effort to yield results.

Investment markets work in the same way. You can’t predict when the market is going to rise and fall, so stop trying to work out the perfect day to buy in. Successful investing is based on playing the long game, and spending a lot of time invested in the market before you can expect to see a positive return.

Expecting to double your profits in a week is about as likely to happen as finding a Brad Pitt look-a-like on the first day you join Match.com.

It’s All About Diversification

Smart online daters know that they can’t limit themselves to just one site.

With so many online dating sites out there, how can you be sure that Mr Right has joined up to the same one as you? If you limit yourself to just one or two dating sites, you are shrinking your potential market and limiting your chances of success. By joining more sites, you increase your chances of finding a profitable site, and can hopefully mitigate the losses from joining a dud site.

The same theory applies to investing. Buying only one or two stocks is too risky and increases your chance of losing money. But buying a number of stocks lessens the risk of any one stock under-performing and improves your chance of a positive return.

Also think about the different markets that each of the online dating sites cater for. Big, generalist sites are like your Exchange Traded Funds – they encapsulate a large part of the market and represent the major interests and personality types.

But if you are into something a little quirkier and want someone who shares your interest, then you could also look to join dating sites that cater to a specific niche, like ScooterLovers.com or RockClimbersMatch.com (I don’t actually know if these sites exist or not, but it’d be cool if they did). With each site catering to a different market (read: industry sector) you increase your chances of success.

Beware of Too-Good-To-Be-True Investments

Ok ladies, I know we’ve all been there. He sounds perfect in his profile. He’s got a fancy car, his own house, he’s (definitely, probably) about to be made partner, and he’s looking to get married right away. Where do I sign up?

But what is all that bling and flash really hiding?

  • Massive debt from his car loan and student loan repayments?
  • Oversized mortgage on his too-large house?
  • Life long commitment to ongoing credit card payments?

Just like with online dating, if an investment sounds to good to be true, then it probably is.

If you’re being promised returns over and above the market, or that the stock price is just about to ‘go crazy’, back away. Just like our debt-riddled lawyer, this is one stock you don’t want to hitch your cart to.

Know When to Cut Your Losses

You’ve messaged back and forth and maybe even met for coffee. You started out intrigued, but unfortunately now you’re starting to think this guy is maybe just a little bit boring.

But you’ve already put so much time and effort into this relationship. There seemed to be so much potential that you don’t want to just end it now. What if you’re wrong? What if this relationship is just about to go on an upswing?

Just as with online dating, when it comes to investing you’ve got to know when to cut your losses. Sure, it can be hard, especially once you’ve invested time, money and effort into a stock. And your date probably did appear to be a great investment at the time.

But now the stock price has fallen and you’ve got to accept that this one may not ever come good. And at the same time you’ve got your funds tied up and could miss out on another stock with even greater potential.

In online dating and in investing, if you’ve got doubts it’s almost always better to cut your losses now before it all comes crashing down in six months time and you end up curled up in a ball, full of tears and what-ifs.

Don’t Give Up After One Bad Date

Anyone who has tried online dating has probably come across a dud or two. But what separates the successful from those who swear off online dating forever is that smart investors realise you’ll have to go on a few bad dates before you find something worth pursuing long term.

Just because you’ve been burned once or twice doesn’t meant the online dating market as a whole is worthless. The same way just because you’ve got a few crap stocks in your portfolio, doesn’t mean the stock market as a whole is a bad investment.

In fact, going on a few dud dates will likely make you better at spotting the signs of poor potential. You now have a better idea what to look for, so each new date should be a better investment of your time.

Similarly, buying a few dud stocks just means that you become better at assessing a stock’s potential in the future and the more stocks you buy, the better you are at picking the right ones.

Whether you are building your investment portfolio or looking for someone to spend the rest of you life with, you’ve got to put in a bit of time, money and effort. But it pays to be smart and not get too caught up in your emotions or try to ‘play-the-game’. By trusting your instincts, you can come away with a happy relationship and a growing investment portfolio.

Tell me your thoughts. Have you ventured into the investment market? What other dating lessons can be applied to money?

5 Things to Do With Your Tax Refund

The average tax refund for an Australia taxpayer is going to be at least $2,300 for the last financial year. So just what should you do with your tax refund?

Sure you could use it to splurge on something you’ve had your eye on. Or you could use it to really make a difference to your financial future. Check out the video below where I give my five top ideas for how to spend your tax refund.

Can’t see the video? Click here to view on YouTube.

Want to find out more about Listed Investment Companies? Head over to the Barefoot Investor page to read all about them.

Any other ideas on what you could do with your tax return? How much are you expecting to get back?