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Investing with Friends

I sometimes hear investors say, “I’ve invested with friends before. We’ve always gotten along. We’ve made a pact never to let anything come between us in our relationship.” Have you ever heard this? My experience has shown repeatedly that when an investment goes south, the friendship goes with it.

This friends-and-business issue is parallel to the hobbies-and-business issue illustrated in Chapter 5, “Do What You Know and Recognize What You Don’t Know,” with Jake’s boat-building venture. Although hobby-like enjoyment of one’s business is healthy, Jake found that trying to parlay a hobby into a business may not be. Similarly, although friendships developed within a business can breed camaraderie, expanding a friendship into a business partnership carries great risks. You might remember that Jake lost on both counts: After the failed venture, he lost interest in boating and in the marina and finally even in the friends with whom he collaborated.


  

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