Marion Syverson was in for this week’s Finance is Fun to tell us about how, research has shown that in general there are gender differences in how men and women behave in investing. Marion examined some of them so we can learn our strengths – and weaknesses.
Both are awesome - I mentioned there were general gender difference. Not that one gender was superior to the other. Because we all have strengths and weaknesses. And that’s why we are discussing recent findings on how to recognize those differences and how to alter our decision making to take these characteristics in mind.
Human problems- No matter our gender, as humans we have biases. Here are a few: loss aversion – hurting more in loss than the joy of gain, confirmation bias- hearing more readily the information that agrees with how we think, snake-bite effect- one bad experience that whenever presented cannot ever again be used. These are just a few of the dozen or more biases that we humans wrestle.
Men- Issues more often found in male investors are: confidence (maybe over confidence), behaving more aggressively, according to a March 16th, 2014 article by author Suba Iyer they trade more frequently- on average 45%- reducing their returns. Generally men have a higher risk tolerance than women.
Women - Generally, women are more pessimistic about expecting high gains, don’t like ‘hot stocks,’ often tend to migrate towards fixed income holdings and take more time making decisions about their investments. Women often get their information from peers, who may not be their best advisors, or most knowledgeable.
Know your strengths - Both genders have good tendencies and less beneficial ones. Combine that with everyone’s biases and there can be plenty of issues.
Decide to be more systematic in research or education. Try to be more decisive if that is needed or to trade less often. Recognize the areas in which your struggle and be determined to balance out your inclinations for a more reasoned approach.