I have noticed over the past 20 years since I made the transition from banking to money management, that women are different than men when addressing financial issues, and investments in particular. At first I thought it was just my observation, but then I started noticing articles on the subject referencing research results indicating some very interesting conclusions supporting my original thoughts. Not surprisingly, this research showed women and men have differing attitudes regarding money and investing. Men usually measure investment results quantitatively, while women usually measure them qualitatively. A man might have a total return portfolio goal of 8% (currently unrealistic) over an intermediate period of time, while a woman wants to be certain she has sufficient money in order to live comfortably in retirement and provide for her adult children, if they need financial assistance from time to time.
Men tend to make investment decisions quickly and without much of an analytical process behind the decision while women appear to be indecisive. Women take more time because they want to learn as much as they can before making a decision. They want to make an educated decision, one which will continue to be viable into the future. (After all, they are the ultimate shoppers, and buying 100 shares of IBM is not that much different than buying a major appliance.)
Women are typically more comfortable in a situation where they have a relationship with an investment advisor, and that relationship includes a process with an investment plan based on their financial goals. Men are oftentimes comfortable working with a broker on a transactional basis, paying a commission for trades. Investment advisors usually lose patience with women because of what appears to be their indecisiveness, and as a result many women are disappointed with professional advice. Delay in reaching a decision on the part of women regarding a particular investment or an investment strategy can be frustrating to an investment advisor (most of them being men, of course,) since they are usually impatient people themselves and quite decisive.
Not surprising to me, women’s investment returns are, on average, better than those of men who are disillusioned with an investment if it does not perform well in the short term, while women stay the course because they believe in their investment plan as agreed upon with their advisor. Women are also more conservative investors than men. They use Warren Buffet’s strategy and buy stocks they know, such as Walmart, Coca-Cola and Proctor & Gamble. And, that has been proven to be a winning strategy. Men are more aggressive investors, oftentimes not fully understanding what they are buying, purchasing at top dollar on the advice of a friend, for example.
Interestingly, if you take these findings for individual investors, you might wonder what investment returns for women hedge fund managers and mutual fund managers are compared to those of men? Well, I am beginning to find research results on this subject, and they indicate these women generate better total returns, as well. They are probably not statistically significant at this time because there are so few women investment managers.
So knowing all this, it has been my objective to instill confidence in individual women investors. Oftentimes, they relinquish such decisions to their husbands, as a result of a busy lifestyle and an assumption that their husbands are better at financial matters. However, later in life (after the death of their spouse or a divorce), they realize they need to take charge of their own finances. I convince them they can become more knowledgeable in such matters. I also let men know that they need to listen to their wives because they have something very meaningful to add to the investment process and related decisions.