Sunday, March 14, 2010

Are Women Better Investors Than Men?

What Many Men Missed: 1-year returns of 53.2% for the S&P500, and 46.8% for the DJIA( click to enlarge)

From the NY Times, "How Men’s Overconfidence Hurts Them as Investors":

"Men and women invest differently, a growing body of research has found. And in at least one important respect, women may be better at it.

The latest data comes from Vanguard, the mutual fund company. Among 2.7 million people with I.R.A.’s at the company, it found that during the financial crisis of 2008 and 2009, men were much more likely than women to sell their shares at stock market lows. Those sales presumably meant big losses — and missing the start of the market rally that began a year ago (see chart above).

Male investors, as a group, appear to be overconfident, said John Ameriks, head of Vanguard Investment Counseling and Research and a co-author of the study. “There’s been a lot of academic research suggesting that men think they know what they’re doing, even when they really don’t know what they’re doing,” he said. Women, on the other hand, appear more likely to acknowledge when they don’t know something — like the direction of the stock market or of the price of a stock or a bond.

Staying the course and minimizing costs — selling high and buying low, if you trade at all — are the classic characteristics of good long-term, buy-and-hold investors. But during the financial crisis, the Vanguard study showed, men were more likely than women to trade — and to do so at the wrong times."


At 3/14/2010 8:05 AM, Anonymous Anonymous said...

Over the last 30 years, I've sold exactly 2 times: October 1987 and November 2008. Both times involved about 5% of our portfolio. Both times were to raise a safety level of cash in case of future financial ugliness - like being laid off. Both times I was totally clueless about the direction of the market in the future. Both times I was able to say to my wife, "don't worry, I took some precautionary steps - we won't starve."

If my previous "sales" actions were representative of the male gender, may I suggest "our" investment decisions were one of paying attention and then taking steps of protection to assure our families could ride out the storm for an extended period. We were willing to fore go return to better provide (survive?) if worst case scenario struck.

In contrast, female investors were so clueless about the potential of really bad outcomes, or their investable assets were such a minor portion of the family's portfolio, they didn't take any appropriate steps to prepare for unknown outcomes.

If I'm right about the above, then the NYT's article is just another politically-correct attempt to bash males, drawing incorrect inferences from a very complex decision-tree experience. Gee, what a surprise.

At 3/14/2010 9:17 AM, Blogger juandos said...

Ditto anon's comment...

At 3/14/2010 9:36 AM, Anonymous spamSoup Party said...

Is it true

Are women long :

preferred stock
large cap industrials

Are men long :

common stock
mutual funds
penny stocks
junk bonds

Do women use more :

On-line low commission broker
Limit orders

Do men use more :

Stop loss orders
Full service broker

Who is wealthier?
Your mother-in-law
in Waccamahaw?
The World's Wealthiest Man?
Or Geisha Day-Trader from Japan?

At 3/14/2010 11:04 AM, Anonymous gettingrational said...

The mind set of women vs. men is:

women are nuturing for growth;

men are competing for victory.


For investing, John Bogle (Vanguard's founder), has proven the long term growth approach is superior.

Personally, I like a combination of a basic core of long term growth and a more agressive portfolio of potential high growth stocks in emerging companies and industries.

BTW, my wife consistently did better then myself until a male financial advisor conviced her to be more agressive. Free Advice: If you are married, keep your investments separate and see who who nutures their portfolio to victory.

At 3/14/2010 4:16 PM, Anonymous Stephen said...

I thought that there was no "right" or "wrong" time to buy/sell, or do Vanguard and NYT believe in market timing? Perhaps men's risk preferences change more than women. They become more risk adverse during a recession. If this risk aversion results in more selling in stock, than it shouldn't matter unless we believe that you can time the market.

At 3/14/2010 4:45 PM, Anonymous Anonymous said...

I don't know if women are better investors than men or not, but I do know that they are why men invest. They are why men do every thing. We only make money because it makes them happy. Hell, we spend three quarters, or more, of our day thinking about them. So, maybe they have more time to think about investing than we do.


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