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Financial Surprises


People generally do not like surprises, especially related to money. That's because they are not usually positive. Here are a few examples of surprises, the knowledge of which may help your personal bottom line.


People generally do not like surprises, especially related to money. That’s because they are not usually positive. Or at least it seems that way. So to avoid financial unpleasantness, we learn, we prepare, and we plan. We do the best that we can. I have cobbled together some information that raised my brow. Using this information might work to our advantage from time to time.

For example, did you know that when money managers get married or divorced, they “significantly underperform,” according to researchers at the University of Florida, reported in The Wall Street Journal. Specifically, the dip averages 4.3% in the period 3 months before and 3 months after these connubial events. And for 2 years after, the dip averages 2.3%. What’s surprising is that it took so long to document an expected effect.

In this era of low interest rates, where we are carefully watching things like transaction fees, such dips are best avoided, especially if we are forewarned. What the study did not tell us, however, was exactly how we are to keep track of fund managers’ marital adventures. Maybe we should just invest in monk-managed funds.

Another useful and surprising tidbit ferreted out by researchers in Finland, also reported in the WSJ, tells us that the largest mutual funds have a tendency to sell near the end of the month and to buy near the beginning of the month.

Why do they do this?, you ask. One reason is that pension checks are distributed near the end of the month and the funds have to sell to pay them. Funds also receive deposits from the paycheck cycle about that time and managers go back into the market to buy, raising prices. There is also the predictable band-wagon effect of investors following the herd pushing the effects further.

So an opportunity is created for the individual to, say, all other things being equal, buy a stock 3 days before the end of the month and sell 3 days into the month. The funds themselves have their returns blunted by selling into a dip and buying back as prices rise. Over time, these small tendencies matter.

Here is another surprise, reported in the WSJ. We already know that women investors tend to do better than their male counterparts, if only because they trade less. But now the Motley Fool reports that companies with the highest percentages of women in their management and boards over the last 6 years averaged 14% growth, compared to 10% for more male-dominated companies. Interestingly, there are mutual funds that specialize in such female-managed investments, such as the Pax Elevate Global Women’s Index Fund.

Here is one last money surprise I discovered as I was preparing to lease a car for my wife. Only 10% of lessees exceed their mileage limits, while 71% come in below the limit. This means that for most of us who might lease a car, we are paying too much for a relatively predictable usage. It’s just one more advantage that the car dealers have to surprise us when we negotiate with them. As if they needed another one.

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