That men are more aggressive than women isn’t news, but how that translates to their investment styles can determine the success of each group. Two recently released studies looked at how women and men differ on investing, and how it can affect their portfolios. The FINRA Investor Education Foundation in league with George Washington University found how women lag behind their male counterparts in investment knowledge and confidence, while a Money Crashers survey found that men definitely have more confidence, but that’s not always a good thing.
In a 10-question question quiz measuring investment knowledge, the FINRA/GWU study found that only 8% of women vs. 21% of men got 80% or more answers correct, indicating a high level of investment knowledge. And 40% of women vs. 26% of men answered only 30% or fewer questions correctly, indicating a low level of investment knowledge, according to the research.
Other findings from the study found that 57% of men vs. 44% of women felt confident that U.S. financial markets offered good long-term opportunities. In fact, 71% of men assessed themselves as having a high level of investment knowledge (vs. 54% women). Less than half, or 49%, of men feel comfortable making investment decisions, vs. 34% of women.
Looking at the psychology of investing differences between men and women, the Money Crashers survey found men were twice as likely as women (22% vs. 11%) to believe their investment returns beat the broader stock market.
The majority of men, 59%, preferred to manage their own investments vs. 34% of women. In fact, 47% of women said they preferred using a professional advisor, versus 27% of men. Eleven percent of women used robo-advisors, versus 12% of men.
The abundance of male confidence can actually lead to destructive investment behavior, according to the Money Crashers study. It quoted a study by the University of California-Berkeley, which found men traded 45% more than women in the 1990s. This behavior reduced the men’s returns because it caused overtrading and brought on higher transaction costs, the study stated.
The FINRA/GWU study did find that those investors, both male and female, who had high confidence were more likely to have higher investment knowledge. This knowledge, or lack thereof, is correlated with how people plan for the future.
It found that 73% of those with high investment knowledge, both male and female, were more likely to plan for retirement, vs. 62% of those with low knowledge levels. Similarly, 90% of those with higher knowledge had emergency savings vs. 78% of those who had low investment knowledge. Only 21% of those with high investment knowledge felt anxious when thinking about personal finance, vs. 48% of those with low investment knowledge.
A 2017 Fidelity study found that women actually outperformed men by 40 basis points per year. The study stated “many of the characteristics some view as being inherently female are actually factors that may be helping women see strong returns on their investments.”
Money Crashers found that one issue is men take more financial risks, or “tend to be more adventurous.” It stated that men were most confident in trading stocks, real estate and bonds. Women ranked real estate the highest, followed equally by stocks and bonds.
“We found that men opted for less-certain assets like stocks‚ 21% of men polled in the survey said they were very confident in stocks as a long-term investment, while only 5% of women felt that way,” stated the study. “Women preferred less volatile assets such as real estate.”
That said, a majority of both sexes were in the stock market, although it came to about 51% of women and 74% of men.
Women take a longer-term approach to investing, according to the survey, while men “don’t leave their investments alone to grow. They believe they can outperform the market,” the study states.
Other findings showed that women were more “committed” to the idea of socially responsible investing. When asked about the importance of a company’s social mission, 49% of women said it was extremely or very important to them. Only 29% of men echoed this.
The Money Crasher survey of 1,017 people was conducted between July and November 2019 through social media, email and online forums.
The FINRA/GWU study was based on an online survey of 2,003 adults in July 2018.
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