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Invest Like a Girl

"Can I talk with your better half?" was the caller's request to my sister-in-law.  She replied, "Speaking."  Not long ago, my wife, upon leaving for a prolonged stay with one of our daughters, uttered a similar self-evident truth. "You would starve to death with a full refrigerator if I weren't around."

I appreciate how much information can be conveyed in single word or simple sentence of sarcastic humor.  And I am amazed that women are referred to as the weaker sex.  While I may be able to lift more, run faster, and jump higher, my wife is far better at handling the day-to-day vicissitudes of life, which probably explains why she will live longer. She has the temperament and I have the testosterone.  Just the other day, a testosterone-fueled ego trip drove me to set a 1,000-meter age group rowing machine record that my trainer exclaimed will never be broken.  However, this stud turned into a dud when I came home to an empty house (my wife is gone for a few weeks.) Without her calming temperament, I couldn't relax enough to sleep.  Chamomile tea, reading the Psalms, and meditating didn't work.  I finally calmed down enough to doze off by curling up on the coach with my granddaughter's teddy bear.

As I reflect on the recent volatility of the stock market, I am reminded that the calming temperament of a female investor is preferable to what Jason Zweig refers to as, "...the testosterone-poised sandbox of the male investor." In a Mother's Day Wall Street Journal column he said, about male investors, "...the most important thing is beating the other guy; the second most important: bragging about it. The long term is somebody else's problem, and asking for advice is an admission of inferiority."

In a Forbes article about her book, Warren Buffett Invests Like A Girl, Lou Ann Lofton is quoted as saying, "It's all about controlling your emotions. It's all about temperament. Buffett has always said that it's temperament - not intellect - that makes you a great long-term investor." And temperament is more behavioral than it is emotional. That's why, according to a survey by Ellen Peters of the University of Oregon taken at the bottom of the 2008/2009 market crash, "The women were more concerned (fearful) but took fewer actions..."  This fact was confirmed by a Vanguard study that looked at movements in IRAs during this volatile time. As Peters explains, " were more likely to panic and sell at the bottom - at the exact wrong time. They were unable to control their emotions. Whereas women, who tend to be calmer, patient and with a longer-term outlook, did not. They held fast."

Holding fast is difficult, but it's exactly what Nobel laureate Eugene Fama recommended when asked how he personally handled market volatility.  "Do nothing... Choose the risk tolerance you're OK with and hold tight."

As an investment advisor, my job is to help clients build portfolios that have the right risk tolerances. But even when a portfolio has the right risk tolerance, Fama reminds us that, "The world is risky. It's not very easy to see through things while you're going through them..." And that's why it is also my job to educate clients on how volatility affects emotions before it happens, and to encourage them to hold fast when it does happen.

In the midst of a market meltdown, fear is the natural human emotion and flight is the instinctual reaction. And while we all have difficulty overcoming this disastrous predisposition, men are the weaker sex in this regard. So neuroscience informs us that we need to develop the temperament of a Warren Buffett that is tapped into his better half and invests like a girl.  It is not a natural instinct, but a skill that can be developed over time.  In the meantime, if market volatility is keeping you up at night you might want to follow my example and get a teddy bear.