Most of what you do in your financial life involves negotiating. In particular, investing is a series of negotiations.
As an investor, you seek a deal in which you will exchange payment for some instrument that (hopefully) will appreciate in value.
This may be a stock (an ownership interest in an enterprise), a bond (debt), or some sort of commodity (a thing that has value). Or the object of the deal may be some derivative or combination of these things.
In any case, the terms of the exchange are bargained for until a final agreement is reached. Both sides are looking for value from the deal and each side hopes to claim as much of that value as possible.
You should remember that there is always someone on the other side of the negotiating table. Whether apparent or hidden, principal or agent, some entity is bargaining to get the best possible terms from you. The person you are buying that stock, bond, or gold coin from is just as interested in getting the best possible deal as you are.
This is equally true whether you are interacting directly or through intermediaries such as brokers or advisors. They want the best possible price and you want the best possible price. In that, your interests are in direct conflict.
Since the publication of my book, readers and students have expressed their skepticism. “It usually doesn’t feel like a negotiation,” they urge, “but rather like a “take it or leave it situation.” That doubt actual serves to underscore the argument. An entire industry has worked very hard to obscure the fact that you are in a negotiation.
When investing, you have these choices:
- You can hold out for better terms
- Walk away and take your best alternative
- Or simply accept what is offered
The latter choice will cost you a great deal of money over time.
Understanding that every investment you make entails a negotiation, even if you don’t notice it and let the opportunity pass, will prove remarkably valuable to you.
Focus your mind on this concept. Look at your investing through the eyes of a negotiator. Sharpen your skills.
Becoming a proficient investor-negotiator will pay back the effort many times over.