Do You Invest Like a Man or a Woman?

From the Globe & Mail:

If there’s one constant in almost every study about investing, it’s that a real gender divide exists in financial behaviour. But when do women do it better, and when is it prudent to follow where men tread?”

The Globe & Mail (Canadian Newspaper) is running a whole series on Women & Retirement and last Tuesday they featured some research comparing the investing attitude of women vs men.

The article gives an example regarding how fast does interest compound, and more men than women got the answer correct:

“When we started doing this research – it was back in 2005 – one of the things we found was a striking gender difference, but this was a sample of people 50 and older,” says Prof. Lusardi, an economics professor at Dartmouth College in Hanover, N.H. “So we thought, it’s only generational.”

In a subsequent study aimed at young people from 23 to 28, Prof. Lusardi was surprised to find the results didn’t vary much. “In this sample that included young women – they’re very educated, very modern, very independent – [we found] the same striking gender difference.”

The researchers offer a series of reasons explaining this including:

Why the difference? Experts suggest it has a lot to do with how boys and girls are socialized. “In households, knowingly or unknowingly, we prepare males better …,” says Tahira Hira, a professor at Iowa State University who co-authored a 2007 study on gender differences in investing.

My Take

Perhaps the above is true, and that maybe men can answer the technical aspects of finance better because maybe they spend all of their time reading about finance and arguing with their friends. However, I have found that in my experiences with clients, women tend to be very good in the department of savings, frugality, and expense control.

Maybe they can’t tell me how fast money/debt will compound at 10% interest, but they can commit (often better than men) to saving a large portion of their income, and budgeting to make sure they maintain financial security. They also tend to work more with financial advisors and work from a plan.

For example, when it comes time to roll over a 401k to an IRA, or transfer a retirement account, men will often want to shoot for the stars where women take financial planning for retirement more seriously and will consider securing an income floor before taking chances.

Smart choices take discipline and following sound advice. And despite that article, I think women often can do just fine.

Wondering What to Do Next?

If you are facing a situation like this  and don’t know what to do, give me a call. We have helped people in many situations like this determine their financial security ratios. If you would first like some questions answered give us a call – 781.393.0021 or send us a quick contact and we can go from there. Thanks for stopping by!

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