This is not the first time that Investment Advisor has addressed gender-based differences when it comes to money. Below are a few excerpts from Olivia Mellan’s article, “Gender Matters,” which originally appeared in the September 2005 issue:
“…One of the leading explorers of this landscape is psychologist and family physician Leonard Sax. Most recently the author of Why Gender Matters (Doubleday, 2005), Sax has opened my eyes to some of the many ways male and female brains develop differently from birth. He says, ‘Every step in each pathway, from the retina to the cerebral cortex, is different in females and males…. Girls and boys play differently. They learn differently. They fight differently. They see the world differently.’
…Research as early as the late 1800s began to identify the areas of the brain that control certain kinds of functioning. In 1964, studies showed that there are very real gender differences in brain geography. For example, language resides in the left hemisphere of men’s brains, while the right side controls spatial concepts. By contrast, the language function is diffused throughout women’s brains, instead of being localized.
…Research shows that boys tend to exhibit riskier behavior when other boys are watching. Girls are less likely to be impressed by risk-taking behavior in their girlfriends, or to enjoy risk-taking for its own sake…Why? Blame differences in the autonomic nervous system. In boys, risky activities typically trigger a rush that they find intensely pleasurable (think paintball games, demolition derbies, extreme sports). Dr. Sax mentions one study where youthful participants played a video game in which they risked a realistic-looking crash. Most of the boys felt exhilarated by the danger, while most girls said it made them feel fearful. In a related finding, girls tend to underestimate their chances of success in physically risky activities, while boys tend to overestimate theirs.
…Fast forward to human investors: no wonder men enjoy taking financial risks that most women shun. No wonder they take full credit for investment successes, while blaming their failures on outside influences. It’s just as obvious why women tend to underestimate their skill as investors, crediting their advisor or good luck when they succeed. In many cases, early socialization reinforces both sexes’ genetic predispositions.
…Knowing how the male nervous system responds to the thrill of taking chances, you may be able to connect to risk-addicted clients with more insight and help them learn to mitigate these tendencies. By the same token, once you’re aware that female clients’ investment anxiety is not just acquired but inherited, you may be more successful in encouraging them to take necessary risks.”