In recent years, there have been a number of studies that focus on the way men and women invest. These studies conclude that men and women do, in fact, invest differently from each other.
Whether these differences are inherent because of gender, or whether these differences are the result of social conditioning (or a combination of the two) is up for debate. However, the reality is that you are likely to invest a certain way, depending on your gender, and that might hold you back in some ways.
The answer, according to some experts, is to identify the weaknesses you might have in your investing style, and then look at the investing strengths possessed by members of the gender opposite to yours and incorporate those strengths in your own investing plan.
What are Some of the Gender Differences with Investing?
According to Rita Cheng, CFP and CEO of Blue Ocean Global Wealth, there are a few main differences between how men and women invest. First of all, she says, women are less likely to be confident in their decisions. On one hand, this means that they often look for more information, and that they are a little more cautious. Men, on the other hand, are more likely to be confident — and can even be overconfident. This overconfidence can lead to a large amount of stock picking, and can even cause them to make poor decisions when buying shares, since they are confident in their ability to pick the “right” thing.
The tendency of women to be a little more cautious can sometimes mean that they don’t accept some of the risks that come with investing. This can lead them to put their money in low-earning investments that won’t earn enough over time to provide for a comfortable retirement. If women can add a little more confidence to their investing, perhaps by gathering more information and using index funds, they can boost their returns. On the flip side, if men make it a point to recognize when their confidence is leading to impractical risks, they can dial it back and avoid big losses due to risk.
“Women like to understand the impact one decision may have on other areas of their financial lives,” Cheng points out. “This means they need more time to think and process information.” While women need to be wary of information paralysis, it’s not a bad thing for them to connect the dots and look at the big picture.
“This enables women to adopt a longer time horizon and be less impulsive,” Cheng continues. This is something men can learn from. Rather than buying or selling impulsively, it can help to adopt a long-term investing plan that balances risk with caution.
When you look at your own life, finding the balance between female and male styles of investing can benefit your portfolio. For best results, it really is about taking the best aspects of both styles and applying them to your own investing plan. That way, you are more likely to find the right amount of risk for you.
