Catherine Gordon helps oversee Vanguard's Institutional Asset Management group, which provides policy consulting, portfolio recommendations, and investment management to our endowment, foundation, and defined benefit clients.
The timing of Teacher Appreciation Week (May 7–11) and Mother’s Day (May 13) got me to thinking about what my mom taught me about finance. While mothers may not be teachers in the official sense, they play an important role in teaching us about the world around us.
I remember first being introduced to the concept of market efficiency during business school. At the time, I was working for a large Wall Street firm in close proximity to the equity trading floor. As I thought about the precision with which market efficiency was being described in class and contrasted that with the controlled chaos of the trading desk, I couldn’t quite reconcile the two.
As the years have passed, I’ve had more opportunities to learn about financial theory, as well as observe how people make financial decisions in general, and investment decisions in particular. I still struggle with how markets can be efficient when people are involved!
Many of my fellow bloggers have written about the recent turmoil in the markets. Rather than add my two cents to what has already been very well articulated, I’d like to take a different angle.
Have you noticed anything different about the ads on the radio, on television, or in the papers lately? Not long ago, I heard a radio ad inviting listeners to attend a seminar sponsored by the author of a best-selling “how to” investment book. The ad promised that attendees would be able to “forget about diversification, avoid mutual funds, and eliminate 401(k) contributions.” Another ad played on fears by leading with a “Worried about America?” theme and encouraging readers to send for a report promising to identify the “one sure thing for the second half of 2011.”
Many of us do a pretty good job of getting insurance on all the usual suspects: homes, health, cars, life. But I recently came to think about another kind of insurance—what we should do to help our loved ones prepare emotionally to take over our financial decision-making.
In many cases, we’re talking about women. And while many women already handle family finances, some may delegate financial matters to someone else. When this happens, unfortunately, there can be a heavy emotional price to pay after a major life event.
I hate buying cars. Even though I’ve had the good fortune to not have it be a frequent experience, when the time comes for another car, I cringe at the prospect.
The worst was when a car dealer wouldn’t give me back my license after a test drive because he was so anxious to make a sale. It’s so bad that I’ve delegated the process to my husband for the last two purchases. Here’s our deal: he gets the thrill of the hunt and I lose the right to lodge any complaints. So far, so good.
