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Have you ever wondered why vanilla constantly tops the list of favorite ice cream flavors? Or why so many drivers select white cars? Faced with an overwhelming array of choices, it’s human nature to default to what’s basic and comfortable. The consequences aren’t dire when it comes to sweet treats or the color of your wheels. But that same deer-in-the-headlights reaction to choice overload in the world of investing can really turn your finances into a fright if you’re not careful.

Today, for instance, there are more mutual funds than publicly traded companies in the U.S. In the face of such a vast selection, is it any wonder that when it comes to finance, so many people are paralyzed with fear?

As a personal finance expert who focuses on women, I’ve noticed anecdotally that men and women process investment fear quite differently.

When staring down the barrel of financial overload, men tend to react with a fight response. In general, men have a bias toward making more aggressive and transaction-oriented investments. By contrast, I’ve observed that women tend to react more often with the flight response. Women have a bias toward safer, “buy and hold” type investments and/or cash equivalents. (Those buy and hold conservative stocks by the way, have historically trumped the male, “ants in the pants” strategy…)

Why the different reactions? So far there are no conclusive studies. But taking a qualitative poll of men and women you know personally will likely reveal some version of the following: Young boys from an early age are socialized to be providers. Parents may playfully ask their sons, “What do you want to be when you grow up, a policeman or pilot?” But when was the last time you heard a parent ask their little male love bundles if they wanted to grow up to be a prince? Probably never.

Yet young girls are routinely read books about princesses, carry lunch boxes that are covered in images of them, and have all sorts of toys that encourage them to think of themselves as future princesses – objects to be admired and desired.

The subtle message to young girls is that they’re not in active control of their destiny and so it’s in their best interest to spend their time and energy preparing for the magical moment they’re plucked from obscurity and gifted a circle of diamonds on their ring finger.

What, you may ask, does this princess tirade have to do with investing? I’d argue plenty.

I think both men and women fear investing for a number of valid reasons. First, financial markets have become more complex over the past 20-25 years. Just as new flavors of cereal pop up with regularity on grocery store shelves, so too do new forms of exotic investment ideas laden with multisyllabic terms.

Just today I was asked by someone whether they should refinance their New York City condo with a floating rate LIBOR mortgage set to re-adjust monthly after an initial six month period. This mouthful of a sentence is enough to make anyone want to lose their lunch! What ever happened to the good old days where you were offered a 30-year fixed rate mortgage at 5.00% and you knew exactly what your interest and payment would be until the day you owned that house debt free!? It was swallowed by Wall Street.

Millions of people struggle with financial fright, especially when it comes to investing. This is because neither men nor women are formally educated about personal finance. We live in a world with many more choices yet we’re not given an instruction manual for how to navigate the complex financial options available to us.

To add insult to injury, while there’s plenty of societal support for dispelling the myths around marriage and parenting, financial topics are not for polite company. People would rather share intimate details about what goes on in their bedroom, before admitting to how confused and fearful they feel about money.

Interestingly, men and women are different in the way they respond to this fear and lack of understanding.  As a 40-year-old woman living in the Southern U.S. (and by the grace of God having the good fortune to look young for her age), I’m frequently mistaken for a vapid, breathing, clothes rack. Out and about with my dashing 6’4” husband, 19 years my senior, I’ve found myself on more than one occasion in the midst of a group of seasoned men earnestly “talking investments” with each other.

After earning a MBA from Harvard Business School, and then my Chartered Financial Analyst (CFA) designation, I spent 15 years as a buyside equity analyst, portfolio manager, and then client service executive.  So needless to say, I know my stocks from my bonds.

So I sit and I listen.

And time and again what do I hear? Pig Latin. Guys will use financial jargon. They will throw out big fancy words at each other, none of which make sense in a true investing context. Rarely do I hear someone speak up and say, “I have no idea what on God’s green earth you’re talking about.” Typically, they just nod in agreement, arms crossed, looking very serious.

Women (whether they are a super-smart doctor, architect, nurse, lawyer, social worker, engineer, teacher or a single-mom-making-it-happen kind of women) often have a very different reaction. They get stuck in cash zombie zone. Faced with lots of options, limited societal guidance or support, they take the path of least investment resistance when it comes to dealing with financial fright. They invest in “safe” investments like CDs and bonds. And, thanks to the corrosive power of inflation, which eats away at the purchasing power of those interest payments and even principle over time, this is one time where safe can quickly become a proverbial four-letter word.

Bottom line, I’ve observed time and again both genders experiencing serious financial fear when it comes to investing. The outward manifestation of that fear may differ by gender (or person). But at the core is an unfortunate combination that over-complicates our financial environment, lack of widespread financial education, and a society that doesn’t encourage people to express financial confusion. Stir this up and you have a toxic cocktail of financial fright.

The good news is that there is an easy antidote. Here are three simple steps to fight back against financial fright with all your might:

1. Limit your investment options to low cost index funds and/or target date retirement funds. Studies show over the long run you’ll beat 90% of active managers and keep more of your return because the investment management fees are lower to boot. You can create a pretty darn impressive portfolio with four simple investments:  the total U.S. stock market index, the total international stock market index, the total bond market index, and the TIPS (Treasury inflation protected securities) index or ETF.

 

2. KISS: Keep it simple superhero. No need to get crazy when it comes to asset allocation. A classic rule of thumb is to take 110 minus your age and set that as the maximum percent of your total portfolio to have in equities. So, if like me, you are 40 years old you’d have no more than 70% of your portfolio in stocks.

 

3. Treat yourself to a session or two with an hourly fee based financial planner. If you feel financially confused, you’re not alone. There is so much choice out there even financial professionals often seek out specialists to help them make decisions for their personal portfolios. So if you’re facing a fork in the road and want to know what options to select in your retirement account or the most tax efficient way to harvest gains or losses in your portfolio, seek out a qualified CPA, CFP, CIMA, or CFA accredited professional.