Concerning managing money, are women better than men?

Men are from Mars and women are from Venus, as John Gray said in his book, which is based on a simple and effective thought, explaining that women and men have a different way of thinking, talking, behaving, which is often opposite.

But no one has ever written about their investment or savings decision regarding whether men or women invest better.

Are men or women better? In the investment risk factor, who is more likely to make money? and what does it depend on?

Before you answer in a comprehensive manner, I told you in advance that several studies carried out confirm that if there is money, many or few, women prove to be more careful and demanding but less likely to jump into risky financial adventures.

Tell me what sex you are and I’ll tell you how you invest

There are numerous studies on the impact of gender differences in investment decisions. Let’s see some.

A research from two professors of finance Barber and Odean (2001), found that the return on investments made by women are on average is better than that made by men. In addition, women have fewer expectations in terms of performance and avoid taking too many risks.

One research made by Boston Consulting Group shows instead that women try to understand more accurately their risk profile, establish clearer financial objectives and look at the long term and investing more prudently.

The American company Prudential has conducted a study on individuals who are primarily responsible for the family income and found that only 20% of women in this condition are considered prepared to make investment decisions, against 38% of men. In addition, while 40% of men like to invest, this only happens to 20% of women

The women of AdviseOnly and financial risk

AdviseOnly, the first social network dedicated to savers, using its user base, it has made an interesting research study on how men and women manage their financial risk. It confirms that women are less likely to take risks compared to men.

● In 2014 women aged between 25 and 34 years, were more likely to invest, compared to 18% of women between 45 and 54 years old.

● Men invest more in shares than women (40% men vs. 38% women) and less in bonds (42.31% of male preferences against 43,23% of female ones). In short, women seem to be afraid of risk

Basically, are investments made by men or women better?

No pain no gain. No risk no gain. To put it in these words, in essence men have a greater ability to manage risk, however they imply greater volatility of their portfolios.

On the other hand, however, women remain more cautious and demonstrate, according to different research made on Wall Street, women get better performance, especially in crisis periods. According to consulting firm Rothestein Kass, the funds managed by women have recorded above-average profits after the crisis of 2008.

According to Prof. Odeal, lecturer at University of California, since 2007 women’s investments made 4.6% more than those of men.

Why are women more risk averse?

Women have a different concept of risk – Research conducted by Unicredit, Sapienza and Zingales [1], shows that men and women perceive risk differently: for 69.50% of the first is an opportunity and 75% of the latter is a threat.

Women still have to work hard on their self-confidence – A study of Croson and Gneeze [2] highlights that:

● Testosterone is also a factor which effect on self-confidence. Men tend to overestimate themselves and the quality of information in their possession. The overconfidence manifests itself both in what they think they know, and in what they think they know how to do, leading them to take risks even when they invest.

● Women have more intense emotions compared with men and feel more disappointment in case of negative situations, even in the financial field.

Women invest less because they save less – This is due in part of the fact that on average women earn lower wages than men. From research conducted by Luigi Einaudi, in collaboration with the bank Intesa Sanpaolo, “a survey on saving and on the Italian investment choices”. Result that women cannot save as men can, despite the fact that the perceived importance of savings is stronger among women (28.5%) than among men (25.8%).

A cultural factor – Although the situation is changing, there are still some legacy of a culture that saw man at work and woman as the queen of the house. Financial decisions are still largely taken by men. Research by Episteme AXA [3] in 2012, Showed the fact, that women are less inclined to decide for themselves whether and how to invest and more likely to delegate these decisions to men. Look at the chart.

Financial ignorance – Women are less attached to financial education compared to men : according to the OECD-Pisa 2012 data on Italian 15 year olds, the score of the girls is 8 points lower than that of the boys. The study of Episteme to AXA reveals that only 38.4% of women read with interest the financial pages of newspapers or printing specializing in financial issues, while the percentage of them who are competent in finance believes is still lower: 36.2 %.

Men or women, it does not matter. If you feel you are in this last category or you are aware of not having developed an efficient training and financial freedom do not worry: you are in the right place to learn finance from scratch and build your Financial Freedom in an independent and informed manner.

To Your Financial Freedom
Alfio Bardolla

[1]Guiso Luigi, Paola Sapienza e Luigi Zingales (2012), “Time Varying Risk Aversion” (2012); Einaudi Institute for Economics and Finance, mimeo
[2]Croson Rachel e Ury Gneeze (2009), “Gender Differences in Preferences”; Journal of Economic Literature, 2009, 47:2, 1-27
[3]AXA, “Le sfide della diversità” (2012), Italian AXA Paper N. 3

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