I hate to be the one to tell you this… but the key to your financial success may not be in your hands, but in that of your female partner’s. In fact, studies show that when it comes to investing, women are more risk averse than men. While guys tend to choose investment options for short-term gain, the ladies in your life prefer investment opportunities that provide a sense of safety and security. While you like to go it alone, women prefer to do research and ask questions.
To generalize, the most important thing to a male investor is winning. They don’t worry about risk and prefer short-term gains over long-term commitments. Women, on the other hand, put safety first. According to one source, women are more inclined to “wear seat belts, avoid cigarette smoking, floss and brush their teeth and get their blood pressure checked. They even have been shown to be 40 per cent less prone than men to run yellow traffic lights.”
A Cautious Approach Leads to Bigger Payoff
So does this mean your lady friends are either less confident or more controlled when it comes to their investing? According to finance professors Brad Barber and Terrance Odean, these traits make women better investors. They found that women’s risk-adjusted returns beat those of men by an average of about one per cent annually.
In short, this means that women trade less frequently, hold less risky portfolios, and don’t expect high returns the way men do. A 2001 survey of financial analysts and investment advisors found that women felt it was more important to avoid major losses, falling below target and acting on incomplete information. In fact, 92 per cent of women said “yes” versus the only 69 per cent of men. The week before the stock market crash of 2008, one in eight men said that they had made “riskier investments looking for long-term growth,” whereas only one in 40 women said the same.
A TD Investor Survey found that women investors felt confident and successful when managing their own online portfolios. Not only that, but more than three quarters say they consistently outperformed or performed close to the market. Some 87 per cent of Canadian women are confident in managing their portfolio, although 13 per cent say that they feel nervous and “never feel like they’re making the right decisions when it comes to their investment.”
Advice from Women Investors
When it comes to risk, 38 per cent of women don’t take chances with their money at all, and 58 per cent are willing to take small chances. Interestingly, only four per cent of women polled considered themselves as having a high risk tolerance. And guess what? It pays off.
In a survey conducted by TD Bank, women offered these three tips to other women investors:
1. Do your research.
2. Start small and work your way up once you are comfortable.
3. Don’t be afraid to ask for help, you don’t have to do it alone.
So gentlemen, if you’re not already involving your significant other in your investment portfolio, perhaps you should be. Based on the above research, you’d be doing yourself – and your future – a favour.
This Valentine’s Day, instead of spoiling her with flowers (or along with it); why not flatter her in a different way? Ask her to be a part of your financial future – together. I think you’ll be glad you did.
A female investor friend