How Gender Impacts Investor Behavior

Who do you think tends to be better investors: men or women?  The latest in a fairly large body of research on the topic sides with women.

As reported by The New York Times, a Vanguard analysis of 2.7 million IRA investors found that women were less likely to sell their equity investments at last year’s stock market low.  The study found that during the recession men made more trades than women and did so at the wrong times.

This study is consistent with numerous others showing men to be more confident than women as investors and more comfortable taking risks, while also more prone to making investment mistakes.  As the author of one such study noted, “In general, overconfident investors are going to be interpreting what’s going on around them and feeling they are able make decisions that they’re really not equipped to make.”

A Merrill Lynch study found men to be more likely than women to allocate too much of their portfolio to one investment, make investments without doing any research, and trade securities too often.  Perhaps least surprising to anyone who has ever watched a lost man pass up numerous opportunities to ask for directions, the same study found that women are much more likely to seek investment help from professional financial advisors.

What explains the differences in investment behavior between the sexes?  No one knows for sure, although plenty of studies are under way to try to find out.  In the meantime, some researchers are recommending that men turn over the investment reins to the woman in their life.

Men, care to share any investment mistakes you can chalk up to over-confidence?  Women, have your investment results exceeded your own expectations?

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One Response to How Gender Impacts Investor Behavior

  1. Mitch Maloney March 23, 2010 at 11:19 AM #

    Matt,

    I tend to be more risky than my wife on all things. However, until I started disciplining myself with 25% stop loss plan, I also had a tendency to hold on to a fund or stock hoping it would go back up again (Lucent Technologies is a prime example).

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