Compromise

When not roiling with trolls, battling deplorables or throttling the intolerants on this pathetic blog, I actually have a day job. Simple one, too. Helping people with their finances. It’s solid work. Rewarding. And I like it.

Most who call me are married, common law, shacking up or thinking about it. Thus, I spend a lot of time talking to men and women about money, and each other. Over the years I’ve reached the conclusion that this business is more about people than investing. Sticking money into assets that will grow more or less predictably over time is the easy part. And I have smart guys to do that. The pricklier bit is knowing what people want, and how to get it for them. This is made harder when Mars and Venus are not aligned.

As you know, we talk a lot here about real estate. Experience has shown me a house often means different things in a marriage. Women value property for stability and permanence. Men see it as an investment, but hate the debt. If children are involved, everything intensifies. For cultural reasons Canadians think it’s immoral for kids to grow up in rented premises, or move anytime between the ages of 0 and 22.

Beyond the home, research in the US (don’t know of any here) also confirms my observations that M&V have different overall financial goals. In one word for women it’s ‘security.’ For men it is ‘freedom.’ This may be why how-to money books by female authors obsess over paying off debt, budgeting and reducing overhead. Guy finance books are far more likely to promote stock-picking, beating the market, the next big thing and the mindless accumulation of wealth.

Yeah, this is stereotyping and therefore inherently useless. But the themes are worth noting. Women tend to be more strategic with money. Men more daring. Reckless, maybe. And a prevalent belief is that she is more conservative and risk-averse, while he is more aggressive.

One woman advisor I know says her clients (mostly females) consistently answer, when asked, that their greatest fear is being a bag lady in old age. It may be irrational, but it looms large. By comparison I find men to be competitive, more concerned with performance than security. That sure leads to problems, when investing is confused with gambling. Meanwhile women who shun growth assets increase the odds of outliving their money.

Here’s some research you might have missed: women make smarter, more calculated financial decisions because they’re less competitive and more goal-oriented. Remember, that goal is usually security. A big survey by Stash, a US investing app company, found men and women end up owning almost the same kinds of assets (in terms of risk), but manage them differently. And this could make all the difference in explaining the outcome – that investment returns for the girls beat those of the dudes.

Stash’s analysis found users behave quite differently when markets become volatile. Stash examined its users’ behavior on two especially volatile days when major stock indexes suffered big losses, moving into what Stash defines as correction territory. On those days, the men panicked: Men were 87% more likely than women, on average, to sell an investment. That behavior continued through the following week, with the men remaining 76% more likely than the women to sell an investment. “It turns out women acted more sensibly on turbulent days,” Stash concludes in its report. ”By selling after a market drop, men effectively locked in their losses. The market has since recovered.”

Yes, the market recovers over time. It always has. It always will. Only the duration of the plop is in doubt. When declines occur the sole reason for selling and turning a paper loss into a real one is fear of more losses. But that’s irrational, unsupported by history. Just like thinking you’re smarter than Mr. Market and can pick a few assets that will always hit home runs.

So is it hubris goading guys to risk-on, then panic which amps up failure? Is this what they means by toxic masculinity?

Hardly. It’s a blend of Mars and Venus which best leads to success. Fearing debt, craving security and having a long-term perspective are positives. But so is focusing on growth, the pursuit of wealth and the freedom it brings. As this blog points out, when it comes to finances, human nature ain’t always our friend. We buy high and sell low, are massively influenced by others and suffer from recency bias. Now that everyone’s online, social media has morphed into a destructive force, reinforcing biases and bad behaviour while making fake information mainstream.

Ask your partner what he or she wants. Understand why they want it. Explain yourself. Then compromise.