There is much talk about taxes these days.
Should we extend the Bush capital gains tax cuts? Should we extend them for the middle class and let them expire for the wealth? Should we close the massive federal budget deficit through higher taxes? What do we want?
Meir Statman knows what we want. We want to pay no taxes.
It was anger over taxation by Briton that caused American colonists to toss a shipload of tea overboard in protest at the Boston Tea Party. The current political Tea Party movement also appears upset about taxes.
In fact, we can get a little silly when it comes to want to avoid paying taxes. For example, a retailer can get more attention by advertising a Sales Tax Holiday than by advertising a ten percent discount. The retailer simply pays the seven percent sales tax for the customers, which is cheaper than giving the ten percent discount.
In Meir's new book What Investors Really Want, he describes what drives our investment decisions. When thinking about our investments, we want to increase our wealth (called utilitarian benefits). But we want much more than that! We also want our investments to convey who we are (called expressive benefits). We are often willing to pay more for investments like hedge funds because they say that we are smart, sophisticated and have status. Lastly, we also get emotional benefits from our investments. Some make us feel safe, others excited. We feel proud of our successes.