Female investors tend to hold lower-risk assets and fewer equities, even though they are likely to live longer than male investors.
And, so, a case could be made that women should consider having more exposure to equities and taking on more risk, perhaps even relative to men, according to recent research done by Delaware Investments.
“Women on average hold 20% less equities than men, and this is a problem because if you’re going to live longer you should probably actually be taking on more risk not less risk,” said Sharon Hill, senior vice president and head of equity quantitative research and analytics at Delaware Investments, in an interview with ThinkAdvisor.
Women are living on average 5 years longer than men, according to the U.S. Census Bureau’s most recent statistics, which means more years in retirement. And more years in retirement means increased retirement needs generally, along with higher health care costs.
In addition to living longer, women also have more ground to make up in terms of retirement assets because women on average spend more time out of the work force acting as caregivers and earn less (81% as much as a full-time male worker, according to Bureau of Labor Statistics as of January 2012).
And yet, Hill, who conducted the research, found that women’s investing style may not be getting them the results they need.
“The literature has been showing this, ever since like the ‘80s, that women are more risk-averse than men,” Hill told ThinkAdvisor.
Compared to men’s holdings, Hill found that women have a more conservative approach to investing, and, more specifically, women’s investment portfolios contain a lower proportion of risky assets.
In her research, Hill looked at a National Association of Securities Dealers study that illustrated the differences in portfolio holdings between men and women.
According to the NASD study, women held nearly twice as much in so-called “risk-free” and lower-risk assets (such as cash and money market accounts) than men. The study found that men held almost 20% more high-risk assets than women.
The NASD study, “Gender differences in investor behavior,” published on Aug. 31, 2006, was based on telephone interviews between October 2005 and February 2006 with 591 male and 320 female respondents with household incomes above $75,000.