I’ve found it interesting how I’ve dealt with the uncertainty peppering the economy. I find myself hoarding money one day and blowing a big wad of it the next. As for my investments? I haven’t done a thing, although I know what tweaks I should institute.

The field of behavioral economics has really taken off in recent years, probably because how we handle money is so irrational and mindboggling.

On this week’s Dollar Duo, John and I interview Will Prest of SecurePath by Transamerica. The St. Paul-based insurance and financial services company recently created a quiz on investing personalities. With Will’s help, the video takes a look at how those personalities will translate at the mall this holiday season.

Curious about your personality? Take the quiz.

I came out a  Pursuer and I must admit that doesn’t jive with how I behave as an investor. I think of myself more as a Venturer. I know John Ewoldt found his results didn’t mirror his behaviors either. It makes me wonder if I drank the modern portfolio theory Kool-Aid and behave the way I’m “supposed” to behave instead of what’s most comfortable to me?

I’m curious. Take the survey and tell me if you think your quiz personality type reflects your real investing/spending self.

Here’s an e-mail that’s making the rounds. I didn’t verify the numbers, but even if they’re off, the sentiment is dead on!

Cheers!

If you had purchased $1,000.00 of Nortel stock one year ago, today it would be worth $49.00.

With Enron, you would have $16.50 left of the original $1,000.00.

With WorldCom, you would have less than $5.00 left.

If you had purchased $1,000.00 of Delta Air Lines stock you would have $49.00 left.

But, if you had purchased $1,000.00 worth of beer one year ago, drank all of it, then turned-in the cans for the aluminum recycling refund, you would have $214.00.

Based on the above information, the best current investment advice is to drink heavily and recycle.

It’s called the 401-Keg.

I spent the day writing a Q&A on that very topic. In a nutshell, of course it matters, but there’s not much to do.

Here’s the link to my story. In the meantime, what questions do you have about what’s going on on Wall Street?

And what do you do to avoid abandoning ship? It’s hard to watch the stock market gyrate and do nothing.

My portfolio is now down roughly 15 percent (that was as of Friday so it’s down even more after today’s more than 500 point drop thanks to my heavy international exposure (it would be worse if I didn’t own small-caps and global bonds).

You know those big settlements Merrill Lynch, J.P. Morgan, Goldman Sachs and others have made with New York Attorney General Andrew Cuomo? Well, chances are you don’t have to worry about them unless you’re a high-net-worth investor who had at least $25,000 you wanted to sock away in a vehicle earning more than a money market account that was considered just as safe as one.

I’m talking about auction rate securities, debt instruments for which banks hold frequent auctions to determine their yield and give folks a chance to sell them. They were billed as safe alternatives to low-yielding money market accounts. But the market for auction rate securities froze this winter, a victim of the credit crunch. And many investors couldn’t get their money out.

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I went to an event last night about the markets and the economy put on by Thrivent Financial for Lutherans for its members. The group’s Head of Equities Dave Francis spoke as did spokesman Patrick Egan and Money Magazine Executive Editor Diane Harris.

Diane has written for the magazine for years and I thought I’d paraphrase the handful of insights about investing and our brains that she shared last night here. See if any of this sounds familiar.

1. We fear the wrong risks most. She asked if more people are killed every year by crocodiles, snakes, deer or bears (I think she had another scary animal on the list but I can’t remember it). The answer is that more people die in auto collisions with deer than they do in attacks involving the other animals combined. Her point? Investors worry about losing money in the stock market much more than they worry about their money being eroded by inflation. But history has shown that the market on average goes up about 8 percent per year. And there’s no doubt that if you put your money in a plain old savings account, its purchasing power will be whacked in half by inflation during your retirement.
2. Investors tend to suffer from home bias– investing too much in what we know i.e. domestic company stocks or company stock, and missing out on other opportunities. With the U.S. making up less than half the market capitalization of the world’s stock markets, Harris suggests we have at least 20 percent of our investments in international stocks. And never have more than 10 percent in company stock.
3. Investors are wired for the big kill. We want to make the huge returns, not the slow, steady, and more likely ones. She uses the example of the lottery; even she can’t resist standing in line for the $100 million jackpot even though she knows there’s a greater chance that she’ll be struck by lightening than anointed the next lottery multi-millionaire.
4. We anticipate that losses will be more painful than they really are. She cites a study that was done where individuals were given $5 and told to flip a coin. If they guessed which way the coin would fall correctly, they’d get an additional $5. If they lost, they’d have $3 taken away. Before starting the exercise, participants were asked to predict how they’d feel if they won and how to feel if they lost. They figured they’d stay happy if the won and sad if they lost for an equal amount of time. Turns out they were happy if they won, but the players who lost felt sad for a shorter period of time. The reason? They fixated on the $2 that they still had, not the $3 that were gone.
   This is how I feel about my portfolio. Yeah, I preferred the days when I was earning 12 percent versus the ones where I’m losing 12 percent. But I take comfort in the fact that my portfolio is growing by virtue of me regularly investing through dollar cost averaging, even when the market’s in the tank. And I know that eventually, things will turn around.