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Buy! Sell! and the gender gap

March 2012

Several years ago, a book titled Men Are From Mars, Women Are From Venus was quite popular. It argues that men and women are vastly different, particularly in their emotional needs and in the way they communicate. While not everyone agrees with the notion that men and women might as well be from different planets, most of us concur that the genders frequently behave differently—and this divergence in behaviour may also show up in the way we invest.

Studies and anecdotal evidence suggest these differences in the way that men and women invest:

Men tend to buy and sell investments more frequently than women. This difference could result in an advantage for female investors, who might incur fewer commission charges, fees and other expenses, all of which can eat into investment returns.

Also, by holding investments longer, women may be able to take better advantage of market rallies. During the 2008-09 financial crisis, for example, men were more likely than women to sell shares at market lows, which led to bigger losses among male traders—and fewer gains when some of the stock values began to rise, according to a study by Vanguard, a mutual fund company.

Men tend to invest more aggressively. Perhaps not surprisingly, men seem to be more willing to take risks.

On the positive side, risk is associated with reward, so the more aggressive the investment, the greater the potential for growth.

On the negative side, taking too much risk pretty much speaks for itself. Ideally, all investors—men and women—should stick with investments that fit their individual risk tolerance.

Women are more likely to look at the “big picture.” Although male and female investors want information, women seem to take a more “holistic” approach—instead of focusing strictly on performance statistics, they tend to delve deeper into their investments’ background, competitive environment and other factors.

This quest for additional knowledge may help explain why all-female investment clubs have achieved greater returns than all-male clubs, according to a study by the National Association of Investors Corp., which represents thousands of investment clubs across the country.

Men might be more optimistic about financial markets. Some studies show that men are more optimistic about key economic indicators and future stock market performance.

Optimism can be a valuable asset when it comes to investing; if you have confidence in the future, you’re more likely to invest for it, and continue investing. On the other hand, false optimism may lead to over-confidence, which can have negative results.

Neither men nor women have a monopoly on positive investment behaviours; each can learn something from the other.

Ultimately, it’s your decision-making, not your X or Y chromosomes, that will determine your ability to make progress toward your long-term goals. Educate yourself about your choices, and get the help you need from a financial professional as you invest through the years.

Deborah Leahy is an investment adviser with Edward Jones, specializing in assisting seniors.



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