Jason Zweig had a very interesting article in the Wall Street Journal “For Mother’s Day, Give Her Reins to the Portfolio” referring to a recent study and concluding that you should let women handle your investment portfolio, I thought about this and came to the same conclusion. Here is why I agree with Jason Zweig:
The study points out that women tend to feel fearful whereas men feel angry in times of crisis and these difference in emotions construct a different viewpoint
Those differing emotions lead to divergent viewpoints. Seen through what Prof. Lerner calls “a lens of anger,” the world seems more certain, more amenable to our control and less risky. Viewed through a lens of fear, however, the world appears full of uncertainty, beyond our control and rife with risk.
Have you noticed this pattern? Being involved in the investment world and having the pleasure working with some great female advisor’s I came to realize that this pattern seems to hold true. My Female collegues saw more uncertainty than male counterparts leading them to make more conservative decisions and therefore better returns.
I also noticed this in my personal life, I have been caught calling the bottom three times in the past year and deployed some fresh money into the markets whereas my fiance has been more pessimistic (and rightly so) about the markets and continued to warn me. I have also been more willing to leverage for better returns and she hates the concept.
According to the study women’s risk-adjusted return beat men’s by about one percent per year and this is due to women holding more conservative portfolio’s and looking for lower returns than men do…..hold on… they are looking for lower returns and are beating men by one percentage point? Interesting.
In the testosterone-poisoned sandbox of the male investor, the most important thing is beating the other guy; the second most important: bragging about it. The long term is somebody else’s problem, and asking for advice is an admission of inferiority. Worrying about risk is for sissies. Leverage is good, since it raises returns — while the market goes up
For men the main goal is to get the best possible return and “beat the other guy” while for women the primary concern is safety, now imagine Wall Street being concerned with safety over highest possible return would we find ourselves in this mess?
I took a quick unscientific survey and found out that in almost 100% of the housholds the husband makes the investment decisions, maybe it’s time we let our wives have more control in our investments managment.
If you enjoyed this post, make sure you subscribe to my RSS feed!
{ 2 trackbacks }
{ 9 comments… read them below or add one }
Lol interesting story, I kinda agree. Depends what strategy your talking about, there are very few female day traders, most focus on safety of principle, hence they see very minimal growth (barely beating inflation). It all depends on your age and financial position, at a younger age you should definatly invest in some growth stocks or incorporate risky investments (put/call options) in your portfolio, obviously not entirely but definatly a reasonable portion.
But I like the article, good points.
The study controlled for age and income and even than the risk adjusted return for women beat men by 1% annually, basically women have a better return than men adjusted for risk………
I find this article acutely interesting as I have personal experience to this. I definitely agree with the survey results although there are always outliers or deviations to the norm. My fiancé and I have the same experiences as he is a more aggressive investor than I am. Before reading this article I always felt like I was MIA because of my pessimistic and I guess realistic approach to our finances. Little did I know that exactly those qualities puts me front centre to the action. Cheers to women – no offense guys!
but at the same time I would say women would miss opportunities due to fear
WOW i like this post. Do you wonder why? I am a woman and a financial advisor.
One of the biggest problems with investing is our emotions. In the last decade many people were lead by their emotions instead of common sense. Wall Street knows this very well and they are working hard to control our emotions.
Markets are down and there is a potential for growth and return, if you do it right. Find a financial advisor who knows what she/he is doing. One of the mistakes financial planners and advisors made in the last couple of years is not taking the time to know their clients well. Just because the market was great that does not change a person risk taking approach. Often when investors are saying that they are OK with risk they do NOT mean that they are ok to loose 20-30% of their investments. I can see in my experience that those who took the time and made the right investment choice they lost less. Do not make emotional investment choices.
I am surprised — I didn’t know to was a secret that Women are better than Men at managing investments.
Women tend to listen to their advisors, Women tend to believe in a buy and hold strategy, Women are more apt to go long term, Women tend to go with more balanced portfolios.
That is probably why Women control more wealth then Men in North America.
PS Women are also better cast fishing – simply because they reel-in slower than most Men.
Have heard this argument in several places, but not sure how useful it is to anyone, unless you want to plan to switch to a female financial advisor? I know for myself, however, that I certainly don’t seek lower returns than men do. Of course it all depends in the end on how they set their surveys up and how they factor in dividends, etc., so I don’t place too much weight on statistical-sensational claims like this. I also know some close guy friends who are extremely conservative with their money and don’t know a thing about investing as a result.
Well I think one point you have to keep in mind is that the returns were risk-adjusted returns, which does not mean that the overall returns are better than mens, but I think it’s an interesting study to keep in mind.
nice article this generation in woman are Better At Managing Investments