Everyone invests their money differently, depending on personal preference or interests, what may be fashionable or showing intense growth at any given time or simply taking the advice of an investment manager or financial advisor.
This is also true when you take a step back and look at gender groups. Men are more likely to invest in the stock market than women, who tend to very successfully manage household debt better than their male counterparts.
So why the difference in attitudes in regards to investing?
Research suggests that women are more risk adverse when it comes to finances, and the model of stockholding or investment management is naturally a risk based one.
The more you are willing to invest, the more you stand to receive in returns, or indeed take a loss on. The latter scenario automatically leads some investors to ask questions of the methods involved, such as; “Have they got any idea what they’re doing?” This is a perfectly valid question when you witness sudden and sharp market crashes, and could be enough to put many women off the world of stockholding (even though, more often than not, negative market fluctuations tend to recover quickly and offer a positive long term impact).
Men, on the other hand, are more likely to ‘tinker’ with their finances. Being less risk adverse means they are more willing to move investments around if they believe they could be getting more from another investment pot, even if they are already reaping the rewards. This serves some individuals well with huge returns, but there will also be many that aren’t so fortunate and this may well be enough to turn women away from partaking in such activity. In essence, women are more likely to leave investments alone when they are getting returns rather than looking for greater returns to the potential detriment of their current success.
This risk adverse attitude also helps us to understand as to why women are so adept at managing household debt, as the risk is dramatically reduced when dealing with loans, credit cards etc.
Interestingly, although men generally invest more assertively than women, this isn’t the case in later life. Women take over that mantle around the age of 60, but only by small margins. Both men and women are more likely to protect their investments later in life, but men do it to a greater extent around the years of retirement.
Based on this difference in attitude, who makes better investors?
If the difference in attitude highlights anything, it’s that it serves the market in different ways. If we are to look at the male and female approach to investing as purely driven by risk then you could say that men are looking to back the winners in a market that’s on the rise, whereas women are looking to avoid the worst impacts of one that’s in decline. That’s not necessarily to say that is anybody’s conscious intention or interpretation of the market, but merely how it would play out over time by either being less or more risk adverse in your approach.
When you look at the facts, women make better investors due to their approach to risk. Men tend to make slightly more from the market in returns due to their willingness to back a winner, but they also lose considerably more. When you balance out the fact women receive slightly less in returns while losing considerably less than men, that means the risk adverse approach is serving them better over the course of their investments.
What’s even more interesting is the attitude women show towards the market and how well they will perform in the market in the year ahead. Women are less confident of doing better than the market, which underpins their risk adverse approach to investing in general.
Based on that, you could say the lack of confidence is Queen.