Investing Softly

Steve Abramowitz

HEY GUYS, DO YOU carry a rifle like Clint Eastwood when you invest—or are you a vulnerable romantic like Hugh Grant? My contention: Most of us lean toward a traditionally masculine or feminine orientation when building our portfolio, similar to how we handle many other life choices, from career to sports preferences.

This gender orientation is, I believe, a pervasive bias when buying and selling mutual funds and exchange-traded funds (ETFs), not unlike the behavioral-finance biases you’ve likely read about, such as recency bias and hindsight bias. But gender-influenced investing tends to be more nuanced—it’s personal and specific to you and me.

What follows is how I developed into a sensitive, neurotic investor, reflecting my inner Dustin Hoffman. Perhaps my story will help you identify your own value inclinations when evaluating an investment’s merits—and perhaps allow you to correct the resulting distortions in your portfolio.

My first encounter with my family’s sex-role dynamics came when I was a crafty three-year-old. For the first time, my mother didn’t hang out with me as I fell asleep. Mortified and outraged, I let out a wail, demanding this indignity be rectified. But I had underestimated my father’s determination to shout down my attempt to cling to my guardian. “Fay, don’t go back upstairs to his room. I want Stevie to be a man, not a wimp.”

The messages here were undeniable. Danger lurked everywhere and could pounce at any time. Women more than men would be my ally. I was destined for a scaredy-cat existence.

My experience learning how to ride a two-wheel bike only reinforced these impressions. After promising to steady my start-off by holding on to the back of the seat, my father quickly withdrew his support. I fell hard on the concrete sidewalk and scraped my knee. My mother, watching intently from the front door, screamed at my father and soon put a band-aid across the wound.

Hey, I’m no dummy. As I navigated a threatening world, the feminine stereotype would be my ally. At age five, I was well on my way to becoming a timid and risk-averse investor.

How does my unheroic streak translate into my fund transactions? Take defense stocks. What do Boeing’s planes do? They crash and prolong wars. No surprise, I’ve never sought out defense stocks.

Another twist: As a nice Jewish boy, I’ve never handled a gun and never even seen one up close. All I remember is the Lone Ranger ponying up with his Indian sidekick Tonto, his revolver safely tucked into his holster. Give me one of those socially responsible funds, not because I have good intentions, but because their goals are less terrifying.

Another flashback: My father started out as a TV repairman. He could reach back behind a boxy RCA set, replace the bad tubes and, voila, the picture would turn from snowy to clear. To an impressionable kid, this was the unattainable height of masculine power—and this, too, influenced my investing.

As I’ve mentioned before on HumbleDollar, technology stocks have been my nemesis. I’ve been chronically underinvested in the sector, even skimping on tech-heavy broad market index funds, including the current S&P 500 with its 30% tech weighting. Despite my interest and self-declared expertise in the shenanigans of the stock market, I’ve only partly participated in the technology revolution of the past 50 years.

That brings me to a telling investment adventure. When I discovered no-load mutual funds in the 1960s, I predictably gravitated toward those that hedged relatively volatile common stocks by also including an allocation to bonds. This strategy protected my downside but limited my upside. Then, during a bull run, I noticed the ascent of 44 Wall Street Fund. In my Daily Graphs glossy, the fund showed an eye-popping rise from the chart’s lower left-hand corner to the upper right-hand corner. Misconstruing a bull run with market savvy, I couldn’t resist taking the plunge.

I tracked 44 Wall Street’s performance in The Wall Street Journal almost daily. One morning, maybe a few months after my purchase, I let out a shriek. The fund had lost 12%, even though the market was flat on the day. I was drenched in emotional sweat. The world was indeed treacherous, and I needed to take refuge in a balanced fund.

Chapter 11 sounds like a verse from the Bible. But for my father, filing for bankruptcy, no matter how strategic, was the purgatory for fallen investors. “Stevie, Stevie, never go that route. It would be a shanda on us.” I was, it seemed, destined to be the family shanda—its source of shame.

A few days later, I received the best letter I’d opened since I was notified that I’d passed my driver’s test. It was a transaction statement from 44 Wall Street. It showed a reinvestment of a 12% capital gains distribution, whose proceeds were used to buy additional shares. Minus the unavoidable taxes, the whole fiasco was a wash.

Where do investors like me tend to hide? You’ll find us in the maternal domains of the fund universe. The satellite sector funds adorning my broad market foundations are often health care-related, like Vanguard Health Care ETF (symbol: VHT), and home products-related, like Vanguard Consumer Staples ETF (VDC). As you may have guessed, I’m a genius in bear markets and an oaf when the bulls run.

You might want to explore the family origins of your own personal investment values—which might be political rather than sex-role related—with an eye toward correcting any unintentional portfolio tilts. Liberal investors, for example, may shun oil stocks, possibly unaware they’re compromising their portfolio’s diversification.

Steve Abramowitz is a psychologist in Sacramento, California. Earlier in his career, Steve was a university professor, including serving as research director for the psychiatry department at the University of California, Davis. He also ran his own investment advisory firm. Check out Steve’s earlier articles.

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