The Diminishing Returns of Religion

Anyone who has taken a basic economics class has been introduced to the concept of diminishing returns. In short, this is defined as the point at which an increased unit of production generates lower (not greater) unit returns.

This is also how I would currently define the state of religion, both personally and in the world. Putting more effort into it isn't going to improve things, and at least from a global perspective, it probably makes things worse.

Let's start with the personal. I've been a practicing Roman Catholic since childhood. This included 12 years of Catholic schooling, which in turn included 8 years of nearly daily mass atttendence. After 40+ years, I've attended church services many thousands of times. I long ago learned the routine, the readings, and the symbolism by heart.

So I have faith, and I consider myself well indoctrinated in that faith. The question is, what more is there to know? As long as I lead a life dedicated to respect and the betterman of man and society, it's difficult to see the marginal benefit of continued adherence to the recommended daily/weekly/annual religious rituals.

Plus, over the past several years I've come to realize that the church I follow isn't exactly a role model. Pedophile priests, as well as other politicized Vatican scandals, have conspired to turm me away. And the Catholic church's unrelenting dogma related to gender roles, celibacy, etc. haven't helped. The rest of the world is evolving, my church is not. (How did it ever progress out of the Crusades era?)

My personal religious beliefs take a back seat to the larger world view, however. The fact is, religion is Earth's #1 creator of wars. Name any past or present international military conflict, and you will find that differing religious beliefs are at its core. Hell, even our Civil War was essentially a morality-based disagreement over how humans should be treated.

This is not a good thing. It's maybe the irony of ironies that religion is supposed to give people a reason to live, and we mostly use it to explain why, how, and when people should die.

In spite of this, I do believe that religion is a net good thing for society. If nobody believed in an afterlife, our civilization would be pretty barbaric. We might still be clubbing each other in caves.

But from my perspective, we've reached the point of diminishing returns.

Women Are Better Than Men.....At Investing

Here's a controversial thought: Men and women are different.....in terms of how they invest.

A variety of studies have been done on gender-based financial behavior. The 2007 Sharebuilder Women and Investing Survey finds that women tend to be more involved in the family balance sheet. Just over 60% of women manage the household checkbook; 58% pay the bills; 44% (versus only 23% of men) oversee the budget.

Yet only 15% of married women take primary care of the family investments. This in spite of the finding that, when it comes to choosing investments, women tend to be more diligent, spending almost twice as much time researching mutual funds before investing. This could be due to greater caution on the part of women, or, depending how you look at it, greater confidence on the part of men. Whatever the cause, it pays off for the ladies. Finance professors Brad Barber and Terrance Odean find that—though women hold less risky portfolios than men, pursuing (and expecting) lower returns—after adjusting for differences in risk, women achieve better returns.

Before women take a victory lap, note that there is a larger, gender-neutral point: Overconfident investors trade too much. Barber and Odean take pains to assure us that gender is but a convenient statistical tool for the real factor at work – overconfidence. Psychology researchers have long held that men are more prone to overconfidence, so we'd expect them to trade more aggressively. We'd also expect this trading to increase costs, which in turn will reduce performance. To test this, the authors set out to determine if the population that is naturally overconfident earns lower average returns than the population that isn't. (See? It's not about men and women at all!)

The professors analyze a huge database of brokerage accounts from the 1990s. They find that married men trade 45% more than married women and earn annual risk-adjusted net returns that are 1.4% lower. Moreover, the differences widen when the sample isn't married people: Single men trade 67% more than single women and earn annual risk-adjusted net returns that are a full 2.3% lower. Worse still, the men have average turnover (a measure of trading frequency) of 77% per year, while the women have average turnover around 53% per year. (Both of those percentages are high – maybe both groups need advisors instead of commission-paid brokers!)

If you believe the stereotypes, these results shouldn't surprise you. Men are supposedly brought up to embrace competition and risk. This translates into winning short-term sprints, not waiting out marathons in broadly diversified strategies. Sure, research is great, but guys don't like to ask for directions. Women, on the other hand, are more likely to avoid knife-fights, or take a flyer on some dicey investment. The research shows they're also more likely to seek out data and expert help, and to take their time – perhaps too much time – before committing assets.

In the final analysis, it’s best for both genders to avoid the pitfalls of emotional investing, the symptoms of which are frequent trading and/or improper asset allocation. Successful investing requires a mixture of confidence and caution, along with a healthy dose of objectivity, patience, and knowledge. These traits will make better investors of both men and women.....and there’s nothing controversial about that.