Money For The Boys

In Peter’s comment that I commented on yesterday, Peter wrote:

“I also invest in the stock market and I have been derided for this before but whenever I make any financial commitment I always discuss it first with my wife. Although we sometimes have disagreements in what shares to place our money, sports wise she just lets me get on with it. However we first agree to how much we are willing to place into the venture and she periodically likes to know how the investment is going.”

With less than a quarter of all jobs in the STEM fields (science, technology, engineering and mathematics) held by women, either women are not interested in such subjects, or they are put off by social factors.

If we look at chess, why are only 3% of the top players are female? It may be because chess is not the most exciting of interests, but you might expect most people to be interested in money. Not when it comes to making decisions about it though.

If women are a significant part of the economy and control an important percentage of investment capital, the story is much different when it comes to women managing money.

According to recent research, women represented a scant 10 percent of all traditional mutual fund managers, a figure that has barely budged over the past decade despite increasing numbers of women with degrees in finance and women certified as financial advisors.

The disparity is even more apparent in the world of alternative investments: In early 2008, women managed a mere 3 percent of the approximately $1.9 trillion invested in hedge funds.

Investing decisions are best made by the person most qualified to make them, and if you are in a relationship, in the majority of cases this is the man. Not always the case I know, and nothing to do with men being more intelligent than women, but unless Peter’s wife is qualified or experienced in some way to offer input on the topic of financial management, the decisions should be left solely to Peter.

As a courtesy, bigger decisions should certainly be communicated after the fact, but typically women have little understanding of risk and reward, erring on the safe side more often than not, and don’t understand probability. They could if they were interested, but they are generally not.

I have a personal anecdote to illustrate some of these points. One concerns the time that my grandfather returned home from the Stock Exchange in London and over dinner told my grandmother and mother that he had bought a new house and that they were moving. It was the first they had heard of it. I rather like that decisiveness. No getting into a big debate about whether or not to move, how much to offer, should we / shouldn’t we etc. The first the girls knew of it was when it was a done deal.

There was something of a rebound effect from this incident which rather illustrates the second point. My mother, quite possibly determined not to be in the same situation as her mother was, always had a say in investment decisions, and unfortunately for my future inheritance, she always erred on the side of (extreme) caution. When it was suggested decades ago that investing in the stock market was a good idea, her reaction was one of horror, with her saying that unless you knew what you were doing, you could lose everything. Once her mind was set, any attempts to explain diversification, spreading the risk, were doomed.

 It’s essential to have a disconnect when it comes to money and investment decisions. You can't be emotionally connected in what you are doing or you're lost, and women (in general) cannot make this disconnect. Top women poker players? Few and far between. If you are even remotely concerned with having to explain yourself to others, or about an upcoming bill that you need to pay from your winnings, even with artificial constraints such as the date on the calendar, you are not going to make optimal decisions. This is why it is so important for your betting bank to be totally separate from day-to-day money, and money that you can comfortably afford to lose.

One of the first things Mrs. Cassini and I agreed upon was that financial decisions would be exclusively mine. Financial decisions by consensus lead to poor financial decisions. She handed over the keys to her accounts, and as she’s just not that interested in making financial decisions, the arrangement works rather well. She doesn’t even look at her quarterly statements.

In return, I agreed to stay out of the kitchen and laundry room and away from all domestic duties, and if I say so myself, I have done an excellent job at that. My sister visited recently for a few days, and was amazed that I had no idea how the washing machine works, but I am just not interested. I’m sure I could master it if I wanted to, but it’s called division of labour. I know how the coffee-maker works by the way, but she didn’t seem too impressed by that. Anyway, I would hope that Peter doesn’t offer Mrs. Nordsted advice on her laundry techniques for example or suggest ways in which her cooking or ironing might be improved. These can be sensitive topics I’ve found, and definitely not to be raised when the iron is hot and close by. It leaves a mark.

All Mrs. Cassini needs to know is that the bills are up to date and that when she goes to the supermarket, that there is money available to pay for the groceries. In return, all I need to know is that freshly laundered clothes will be available each morning, that the house will be kept clean, the lawn mown, hedges trimmed, gutters cleared, cars serviced on schedule and that a good meal and a cup of tea are just a click of the fingers away.

Sports investments - money and decisions - are absolutely outside of her purview. The funds are ring-fenced, in an account in my name, and are mine to invest as I wish. She has never once asked me the state of my account, and I would find it very annoying were she to do this. The idea of asking her if, or how much, I can invest on a basketball game is a non-starter.

I guess the bottom line here is that you have complete trust in your partner. When trust is a little thin, you have more problems than your partner poking her nose into your investing activities.