Liberals are Conservative and Conservatives are Aggressive

Here's an interesting MSN Money piece on the retirement portfolios of the VP nominees.

Their retirement nest eggs -- which for both candidates are almost their entire net worth -- are modest in the extreme, amounting to somewhere between $300,000 and $400,000 for each family.

They are also, on the liberal-conservative scale, upside down. Democrat Biden has most of his money in a tax-sheltered annuity, that most timid of investment vehicles. The Republican Palins (husband Todd is the investor) are much bolder, venturing into individual stocks and exotic exchange-traded funds, or ETFs.

If you think $300K is "modest in the extreme", then my nest egg's got a friggin' burqua on; it got about 10% more modest yesterday.

Before I tackle the inversion, ETFs aren't all that exotic as a beast. They're a form of mutual fund that trades like a stock with the advantage that larger investors can cash their shares in for their share of the porfolio of the fund; that keeps the stock price of the ETF from getting too far away from the Net Asset Value of the ETF.

That inversion isn't surprising. Political liberals tend to be skittish about the economy; that's why they want to regulate it and compensate for its excesses and shortcomings. That skittishness can translate into a more risk-adverse investor, so the annuity (a guaranteed set of payments, generally from an insurance company) is a prudent choice for such a skittish investor. "Not taking risks" translates to conservative in investment-speak.

On the other hand, economic conservatives tend to be bullish on the economy, understanding the benefits of the creative destruction of the market. We'll get the occasional crash-and-burns like Lehman but we'll also get success stories, like the Google search engine that you might have gotten here by or the Movable Type software that this post is composed on.

Thus, economic conservatives need not be financial conservative. With a decade or two before retirement, the Palins have the wiggle-room to suffer through bad days on Wall Street like we had yesterday, for there should be plenty of good days to offset yesterday's stinker. They also have the confidence in the market to know that things will get better in the long haul.

That's not to say that economic conservatives can't be financial conservatives; get close to retirement or close to when you'll need that college fund, and the investment mix will shift from stocks and into lower-risk bonds and savings accounts. However, economic conservatives will tend to be more aggressive in their investing.

So, liberals are conservative, conservatives aren't conservative, and I Don't Know's on third.