A couple weeks ago I made this observation:

There are 2 kinds of players on Empire Avenue.  Those with a good ROI whose strategy is to invest in others with good ROIs, and those with poor ROIs whose strategy is to buy shares in others who will buy back regardless of ROI.

(Chris Voss pointed out a 3rd type of player – those like himself with so much wealth that they invest in anyone with a pulse, but since that’s a very small % of players I’m not going to go there in this post.)

The Pros of Buying High ROI

I have been firmly in the first group – the good ROI group – since I started EAv and have dismissed reciprocal buying strategies.  The reasons are fairly obvious.  Investing only in players with good ROIs earns you the highest dividends.  And if you have a good ROI, you don’t need reciprocal buying agreements to get people to buy your shares and increase your share price.

The Pros of a Reciprocal Buying Strategy 

However, I am beginning to have second thoughts about the high ROI strategy and am starting to give some serious thought to a reciprocal buying strategy.  Here’s my reasoning:

  1. There’s a limit to how far a high ROI strategy can take you.  It’s impossible to continue to increase your dividends by a half to a full percent each day because its impossible to increase your social media engagement that much that fast.  Inevitably we will all reach a point where we no longer have a high ROI and others with a high ROI strategy will begin to sell.
  2. It reduces the pressure to constantly increase dividends.  With the high ROI strategy, there’s pressure to continue to increase your dividends to keep up with your share price.  That often leads to posting low-quality stuff to blogs and social media to increase divs rather than to engage your audience and provide them with quality content. I imagine that pressure decreases to some extent when you know people will buy your shares out of obligation to reciprocate.
  3. It reduces the pressure to be on EAv every day.  Take a few days off from social media and EAv and your divs will drop.  If you and your investors have a high ROI strategy, that drop in divs will probably produce a drop in share price which could spiral out of control.  But if you and your investors have a reciprocal buying strategy, you don’t have that problem
  4. It reduces the tension between the game and friendships.  With the high ROI strategy, there’s a constant tension when the ROIs of the people you’ve gotten to know in the game slip.  Do you sell because it’s best for your portfolio?  Do you hold because of the friendship?  Will they get upset with you if you sell?  That tension goes away with a reciprocal buying strategy.
  5. It saves time.  With a high ROI strategy, it takes a lot of time to monitor everyone’s ROIs.  It also takes time to make decision as to when to sell and when to hold.  It’s much faster and simpler to make buying decisions based on who has bought your shares.

Obviously the downside to a reciprocal buying strategy is you earn lower dividends, but it may be well worth it.

Reciprocal Buying Communities