Houlihan Asset Management
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Gender Identity

As an avid observer of behavioral finance, it is fascinating to study how men and women view their finances. While I don’t want to regress into a touchy-feely, planetary Mars/Venus debate, I do think understanding your spouse/significant other’s financial attitude is a beneficial cornerstone of a healthy relationship. After all, financial stress is a primary cause of divorce – especially during difficult economic cycles. Yep, laying a congruent financial framework can go a long way to relieving marital tension.  Let’s take a peek under the sheets.

Investing, at first blush, may seem to be about money, but for many investors, money is rarely the motivating factor driving emotions. Women seldom express they want X return or an absolute portfolio value at retirement. No, they usually view money as a means to an end. “Will I have enough?” or “Am I where I need to be?” are common questions.  My wife takes less than a passing concern in our investment portfolio outside of the occasional “are we on track?” Ironically, she usually throws me this bone after a girls’ weekend Chicago shopping trip. I just nod and scour the classified section for a second job.

Although women are often considered more emotional than men, this characterization doesn’t translate to investing. Women are less likely to react impulsively and tend to carry out financial plans more diligently than men. Women tend to trade less frequently and not get drawn into market volatility. Bottom line, women tend to earn higher returns than men. Females are also thought to have a more conservative investment profile than men. We, as have many empirical studies, have not found this stereotype to ring true.

The male brain has six times more grey matter than the female brain, while the female brain has ten times more white matter than men’s. All that grey stuff implores men to think in a more linear manner. This encourages them to set concrete, measurable goals – such as buying a house or car. By contrast, women’s more abundant white matter drives them to build relationships and take a more holistic investing view - and the effects on their family. Quite frequently, we’ll see the husband handle the investment/retirement aspects while the wife will be more concerned with college funding or charitable gifting.

Men are also more driven by ‘financial vengeance’. They want to get back to even on a losing investment or gain revenge on a defiant market. We commonly see this unhealthy investor pitfall.  Not only does this rob a person of financial capital, it is emotionally taxing as well.  Women tend to view gains and losses in totality while men are more inclined to fixate on just the losers.

In summary, both genders have financial strengths and weaknesses. They can actually counterbalance one another pretty effectively. I learned this long ago from my wife, Michelle. While she may have trouble discerning a preferred stock from livestock, her input has proven far more valuable. Many times, she has provided sound, non-monetary (holistic) perspective that calms & nurtures my (linear) outlook. Superior financial management goes far beyond picking the right stock, mutual fund or asset class. Instead, your emotional reaction to financial news, world politics, market volatility etc. can be the difference between enjoying your golden years in the penthouse or the doghouse.