Paul B. Farrell, who experienced his own midlife career crisis, challenges men to unearth their deeply held secrets which sabotage their financial future, in a recent essay.
He's had some experience with midlife crisis psychology and his position is that investors are irrational and clueless about their motivations.
"The fact is your investment 'strategies' have less to do with your so-called rational brain than with old junk left by your mother, father, childhood traumas, school failures, rejections, deaths and other emotional shocks that secretly rewired your brain long ago," he writes.
Secret Saboteurs Hiding in Your Brain
According to James Hollis, a Jungian analyst, the subconscious "secrets" that possess and drive men, an area common in the male midlife crisis, tell us a lot about why more men turn to active trading, ignoring common sense and logic, resulting in portfolio losses. Simply, "trading is a battleground to prove your masculinity," he writes.
The truth is men are not free: These four secrets blindly drive men as investors. Psychiatrist and Harvard Medical School Prof. John C. Schott, editor of a financial newsletter, writes about typical investor profiles in his book "Mind over Money."
"Each of these styles is based on feelings that are common to all of us" but expressed in varying degrees at different times:
Power Player. They invest to impress, often betting heavy on hot stocks, getting excited about them, overidentifying with their stocks, pouring in not only money but their self-esteem, staking their reputation on them. They have to win, must deny losses.
Impulsive dealer. Driven by gut feel, emotions and raw optimism with minimal rational analysis, even to the point of denying contrary evidence, they are like a teenager falling in love at first sight, blinded, in need of immediate gratification.
Gambling junkies. Many men are convinced they can beat the market because they're above average. They love the thrill of playing the market. Even losses are exhilarating, convincing them to play the odds, certain the next one will be a big winner.
The worry wart. They're their own worst enemy. Agonizing and rethinking every decision. Better off not playing the market because their anxieties create the poor returns they desperately want to avoid.
Risk averse. They know being in the market is essential to building a retirement nest egg. But they don't trust the markets and economy, so they tend to be overly conservative.
Windfall winner. One-time lump-sums, lotteries, jackpots, even inheritances trigger a whole range of feelings: grief, loss, survivor guilt, undeserving, addictive, overly extravagant, confused.
These feelings in turn overwhelm rational investing. Jungians believe that suppressing feelings just turns them into secret, unpredictable saboteurs. For example, in one study researchers discovered that passive investors outperformed active traders with returns of 18% vs. 12%. And yet men insist on actively trading. When actions defy logic, you must ask yourself "who's pushing the buttons."
Whether you're experiencing midlife at 30 or 60 and want to survive your mid life crisis with your finances in tact, I encourage you to visit Paul B. Farrell's website, and download a completely free copy of The Millionaire Meditation if you want to start taking control of your finances and your life.