I have a friend who is a Sergeant in the army. He was telling me about the art of Social Equity. I remember that I had read this somewhere in some book, I think it was Dale Carnegie's "How to win friends and influence people" but I can't recall.
Anyway, Social Equity is sort of like Financial Capital. Think of it as something like money. We all start off with $10,000 worth of Social Equity. After which, we may choose to lend this money to friends, family etc. Lending could be assisting your friend with his college homework, or helping your mom drop a cheque at Wells Fargo. So we could lend a hundred here, fifty there, another two hundred elsewhere.
What happens to this borrowed money then? Well, common sense would dictate that you pay back what you owe. So after helping your mom drop off the letter, she could repay you by buying a nice cold can of coke.
The beautiful thing about this is that you are slowly getting back your capital with a bit of interest as well. So if you started out with $10,000, you may end up with $10,100. The more good deeds you do, the more it will keep adding up. This will just keep snowballing and hopefully, you will soon end up with a Social Bank overflowing with Social Equity.
It is a very simple concept in theory, however it is difficult to implement.
Just like in investing, the main concept is to identify cheap solid blue chip businesses (no pun intended) to buy and hold. However it is difficult to implement because people tend to get emotional with their investments.
The biggest hurdle one needs to get through in investing is to keep their emotions in check. If you are able to see your investment go down from $10,000 to $5,000 without feeling the heat, then you know that you have the temperament to be in the investing game. When you know that people are still pumping gas into their tanks from Shell, you have no reason to fear whether the price of the stock goes from $86 to $70.
Do note that you must do your homework first before putting any money into anything. If not, the price to pay may be too much for you to handle
