It's official: Warren Buffet has a feminine side. Not that the billionaire investor parades around in drag. He doesn't. But the investment patterns of men and women show that Buffet has apparently, over time, tuned into his so-called feminine insight when making investment decisions.
You say potato…
According to Dr. Ellen Peters, a research psychologist at the University of Oregon who co-directed a survey of 800 people beginning in late September 2008 when the economic meltdown was just heating up, men and women have very different approaches to investing.
Men get reactive and angry. That rage takes the edge off any obvious risk, making them feel more bulletproof. (How else would our ancestors have had the guts to take on a woolly mammoth armed with just a spear and a loincloth?) Men are generally more competitive and more aggressive than their female counterparts. And because they tend to be in the thick of it, trading frequently, they are also better at anticipating — and taking advantage of — the soaring highs of a bull market.
Women, on the other hand, approach the stock market with more patience, deliberation and caution. Over time, it's a good way to ensure dependable, risk-adjusted returns on investments, but it probably won't yield any surprise jackpots. Women wait to see how things shake out and then act — or not. It's just more likely to be part of their natural behavior, according to Dr. Peters.
Complementary styles
What does all this gender-specific investment-speak really mean? Simply that the two investment approaches need each other, like a yin and its yang. Of course, it could also indicate that the trading floor of the New York Stock Exchange — as well as your own investment portfolio — needs a healthy combination of testosterone and estrogen to flourish in the good times and ride out the bad ones.
Consider these complementary investment factoids:
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- Men are confident investors. They flip their stocks 45% more often than women.
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- Men aren't afraid to take risks for a potentially big score, while women are less apt to climb out on a financial limb in search of the mother lode.
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- Female investors tend to incur fewer dramatic losses in their portfolios than men — and fewer dramatic wins, too.
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- Women aren't as confident in their stock-picking abilities. In a 2006 Harris Poll survey done for Charles Schwab & Co., Inc., 48% of women said they found investing to be scary, while only 24% of men did.
- In a report by Financial Finesse, a financial education programs company, 73% of men say they generally understand stocks, bonds and mutual funds, while only 40% of women say they do.
Spirit of cooperation
What are investing couples to make of all this? Probably that working together, listening to each other, and choosing funds or stocks in a spirit of cooperation will ultimately make everyone happier — and richer.
These generalizations are just that: general statements about gender differences based on surveys. Maybe you're a risk-taking woman or a patient man. Maybe your investment partner is the same gender as you. The important thing is to use both sets of skills and strengths in order to maximize profit to you both. If you both have the same investment style, seek advice from a third party who can give you the opposite point of view or play devil's advocate.
Here are few more ideas for you and your significant other to consider:
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- Get advice. A little knowledge is a dangerous thing. So if all you know is a little, talk to an investment profession, such as a financial planner.
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- Look your limitations in the face — and then find a way to work around them.
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- Draw from your partner's investment experience or insight.
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- Don't do nothing. The fear of risk can be paralyzing, but sometimes the risk is worth it. You wouldn't stand still in the middle of a thunderstorm, would you?
- Get educated. If you feel like you don't have a handle on your portfolio and how your investments are allocated, learn more about them. Find out how many shares you own in each company, study those companies and follow their stocks' movement in the market.
The bottom line here is that cooperative investing probably yields the best results. Banking on the strengths of your partner's investing style should strengthen your portfolio — and even your relationship.
Author: Cristina Adams
Cristina Adams is the editor of DailyWorth. DailyWorth offers daily personal-finance tips for women.
Interesting post — nice to be introduced to a new blog too!
But what can you do if you’re single? I see a male financial advisor… so I wonder if that helps to even out the point of view?
Interesting survey results and good advice, I think. It’s pretty well accepted that two heads are better than one, and two very different heads could be that much better.
Food for thought: “Men are confident investors. They flip their stocks 45% more often than women.”
Does this really imply that men are more confident investors? I sort of read the opposite.
I know several years ago I didn’t even want to open a retirement account because I didn’t know anything about it. Knowledge is powerful and it may be that those who are educated about the stock market will do better. Men and women both should make an effort to get educated about finances even if they use a proffessional.
I’m not sure about the gender differences, but people usually do have different investment styles and maybe both can be tapped.
If one spouse has an aggressive investment philsophy, and the other is more conservative, they can compliment each other. So maybe one spouse manages 50% of the investment portfolio in a conservative way, while the other half is invested aggressively by the more aggressive spouse.
Since they have mutually exclusive philosophies, it seems each would have greater freedom to go the course they prefer. For example, the agressive investor spouse could be completely agressive, knowing that the other has the other half of the fund covered.
“It’s official: Warren Buffet has a feminine side. Not that the billionaire investor parades around in drag”
*sigh*.
Women are “scared” of investing? What is that supposed to mean? I think scared is a poor substitute description for not feeling educated enough, an entirely different issue. On the other hand, am I really to believe that 76% of investing men are well informed and making decisions based on this? Not likely. Just listen to any financial call-in radio show to realize the gamut of experience cuts across genders. Net result, as others have said, the best thing someone can do, man or woman, is read, learn, try, and learn some more. Learning, by the way, includes talking to others who do not share your views to find out what works or does not work for them.
I never understood diversifying your diversified investments. To say that two people splitting their investments into two different philosophies will “probably” do better than one person with one philosophy does not make sense tom me.
I say educate yourself about the investment strategy that’s most comfortable for you, and stick with it. If you want to split your investment income into two different strategies, one is probably going to do better than the other.
This is one of the most shortsighted, pigheaded and sexist things I’ve read on the internet in a long time. It perpetuates negative stereotypes about both men and women and it is incredibly juvenile in it’s reasoning.
“How else would our ancestors have had the guts to take on a woolly mammoth armed with just a spear and a loincloth?”
Are you freaking kidding me?
That this was written by a woman is probably the worst part. Do you realize the harm you are doing to your own sex?
My wife has the patience of a Buddhist monk. She rocks. While I sold a lot into this rally two weeks ago, she’s still riding it up.
All I can say is WOW. Can’t believe the markets are rebounding so strong. Back to good times.
Rgds,
RB
At the start of this year, right after I was laid off, I turned to my husband and said, “We should invest a month’s expenses in an index fund for a year because either things are going to get better, or the global financial system is going to fall apart.” That index fund is up, like 30%, and there’s no way my husband would have done it on his own. He has buy high, sell low instincts.
I do not agree. In our case, I read about all the investment options and keep my knowledge base updated time to time. My husband has no time nor the enthusiasm to go hunting for best deals and rates. I find the info and he follows up with required phone calls and paper work. I am more aggressive and have been planning ahead for a house downpayment and for a future baby. This is pure generalization, that women are less aggressive.
Was this an audition for a new staff writer? I vote no on this one, sorry. Very shallow.
“73% of men say they generally understand stocks, bonds and mutual funds, while only 40% of women say they do.”
It’s probably closer to 40% for both genders. Numerous studies have shown that men tend to overinflate their knowledge in most areas. I really wish studies would ask a follow-up question (maybe a simple one, like “What is the difference between the NYSE and NASDAQ?” or “What’s the difference between a stock and a mutual fund?”) to see how many people really know their stuff. Bet the percentage would be a lot lower in both cases.
“How else would our ancestors have had the guts to take on a woolly mammoth armed with just a spear and a loincloth?”
I seriously loathe these comparisons. They’re based on a childish view of history. If you’re going to make historical comparisons, at least read some more advanced books so you can say something interesting.
-Erica
Is it “essentialize about gender” day in PF blogland or something?
This is just ridiculous.
Erica, I was wondering the same thing. If men have inflated ideas about their investment expertise, doesn’t that make them more willing to take risks? If women underestimate their investment knowledge, does that translate to being more cautious?
And I wonder if earnings have anything to do with it? Statistically speaking, women earn less than men, and there are more men in high-ranking exec positions than women. If you have less money to work with, doesn’t that also make you more cautious with it?
I don’t know the answers. I’m just posing more questions. 😉
My husband is a bit more conservative with his money. His 401(k) reflects his concerns and risk style. It’s great to have two different styles when it comes to money. Our emergency fund is bigger due to his comfort level.
After going to freelance work, I can appreciate his approach even more.
Point of information: Not all couples consist of a man and a woman. Hence not all couples have these alleged complementary “yin and yang” investing styles. I assume no offense was intended, but I much prefer it when writers don’t assume that everyone is straight. It’s just not so.
I’ll leave the gender stereotypes for others to dissect …
@ Friend #12
I second the opinion. This article tries to mask its inadequacies with numbers and statistics. It reads like a poor man’s “Millionaire Next Door”.
JD next time please publish articles of how couples or partners need to have a common ground or game plan in order to meet their investment goals.
Whenever I read about gender differences, race differences or whatever, I just re-interpret them as common differences between people. Sometimes I fit the female stereotype, sometimes the male, sometimes neither. The point I take here is that working together with someone who has a different philosophy or style or risk comfort than you can lead to a better result.
With my current partner, I prefer each taking care of our own investments, but talking to each other about what we’re doing. We might steal good (or bad) ideas from each other, but I like the sense of personal control. It motivates me to pay more attention.
If my partner had no interest at all, I’d be happy to take over all the work for both of us rather than compromise between one person having some random philosophy and the other not even wanting to save anything at all because they don’t feel like reading up on what to do.
If we were both extreme in the same way, it would make sense to find someone else to work with or at least to talk with, even if it’s just a friend or relative.
I also have to agree and say that this article is very shallow. It is trying to stereotype men into emotional/speculative investors and women into smart risk analyzing investors. It’s not about being manly or womanly or however you even define those terms, it’s about risk analysis and taking on as much risk that you are comfortable with for the potential reward.
The statement that men have higher turn over rates has many factors into play and can’t be taken in a vacuum context.
That’s a pretty disappointing article. Newsflash — different people have different investing styles!
One of the things I have always liked about GRS is that women aren’t profiled as a whole different kind of person (what’s the “default” gender?). This is the first time I’ve been really offended. Imagine how an article describing how people from different racial backgrounds approach investing. This is pretty much how it felt to read this article.
To the author: I get what you’re trying to say, but your approach was careless.
There’s no question (in my mind) that there are different investing styles and that as a general rule some styles are associated with women and some with men. But I think Debbie makes a great point. These are really personality differences. There are some women who have personality types commonly associated with men and there are some men who have personality types commonly associated with women (I am such a one).
It’s a good idea for spouses to combine their strengths. A big problem, though, is that the investing advice field is strongly titled to the male/numbers oriented/macho bragging side of things. I have seen numerous cases where a wife tried to caution her husband not to go overboard with stocks when they were selling at insanely dangerous prices and the husband pointed to “Studies” cited in the male-dominated personal finance field.
If the field were not so male-dominated, we would see many more “studies” coming at things from a very different direction. Those pushing “studies” to support their views often suggest that they are objective. My experience has been that as often or not this is not the case. There are lots of ways to slant things, and those who start with a preference because of a personality issue (and we all have personalities!) usually are not even aware that they are slanting things.
We all persuade ourselves of what we want to believe. The benefit of having a spouse with a different personality type is that he or he can serve to temper our enthusiasms. The downside is that it can be as annoying as heck to have a spouse who possesses the ability to see through one’s mind games.
Rob
“…These generalizations are just that: general statements about gender differences based on surveys…”
Except in this case, the offensive (not to mention confusing and contradictory) “general statements” have completely weakened any point of the article.
I totally agree with Jay – I was expecting a post on how couples need to develop a plan together, and the challenges one could meet along the way. That’s exactly what I’m about to do as I move in with my fiancee and we talk about retirement and buying a house and having kids.
Between the ridiculous post, the comments, and JD shaking his head over on Twitter, my afternoon is far better now. Reality TV drama makes its way to GRS! Yes!
This came up at our house last night. Mr. Sam was talking about how one of his co-workers made a huge profit, taking $100,000-$200,000 stock investment and making a quick profit by buying a stock low (one that we own) and selling it a few months later. This is a stock that was less than a $1 a few months ago and is now trading around $4. So the co-worker made a huge profit but also took a big risk with a heck of a lot of money.
Mr. Sam thought it was super awesome, I thought it was super crazy. Yes it turned out great for this guy but he easily could have lost it all.
Geez… PC police in full effect today.
I’m 100% with Erica Douglass on this one. I have some background in gender studies (I minored in it), and this post is beyond ridiculous. First of all, assuming that any gender differences in investing styles are due to genetic differences shows a complete lack of understanding of gender science. Studies (real ones, I’m leery of the self-reported “studies” listed in this post) have shown time and time again that there is more variation within a sex than between the sexes. In other words, you’re more likely to find two women with very different investing styles than you are to find a man and a woman who fit these stereotypes.
Yes, people should play to their strengths, especially within a relationship. But both parties in a relationship need to be informed – much moreso than the average investor seems to be today. The real fact is that far too many women in America (and other societies) rely on their husbands or another outside figure to handle their finances. This tends to bite people later on, because no one cares more about your money than you do. Other people do not always have your best interests at heart, long term.
Geez… PC police in full effect today.
Since when is pointing out something is really stupid the same thing as “policing”? If you rob a bank, they don’t call you a moron, they throw you in jail.
Personally, I think every time someone does a study on the differences between men and women, they should be required do the same study with the same people, and this time, divide people by some meaningless measure, like those born in the east vs. those born in the west, or those who can curl their tongue and those who can’t. See if the differences aren’t as great as those found between men and women.
I’m not saying that men and women aren’t different, just that the differences don’t apply to everything. Studies like this where they find some little difference and then twist it to fit every pop evolutionary psych theory out there don’t do anyone any favors.
I think sometimes we have to look at the differences between the sexes (like when we’re talking health) but I’m not sure it’s appropriate for personal finance.
If there’s one I’ve learned reading this blog it’s that we have to make decisions based on our own circumstances.
I’m a bit disappointed with the article compared to what I was expecting from the title (an article on how to make decisions as a couple).
Not only does this article only work for opposite-sex couples, it assumes things about the partners that just don’t always apply.
I do fit the female aspects of this article, pretty much. However, my husband doesn’t fit the male one at all. He’s like an exaggerated version of the female one. He’ll never invest in anything, because it scares him too much. Before we were a couple, he would spend his money because he didn’t trust banks with it. To him, putting money in a savings account was too risky, almost like throwing it away.
So, I end up making decisions on my own, because that stresses him out too much. I guess I wish the article had been about how to get together and make big decisions, because I need advice on that more 😛
I’m fairly sure I’ve read somewhere that being a more aggressive investor is worse if you only think you know what you’re talking about – almost inevitably you’ll buy high and sell low, because that’s the easiest thing in the world to do.
You have certainly described the investment difference between my wife and I. We have decided to draw on the difference by only investing on things we both agree with. This requires her becoming a little more aggressive and my becoming a little more conservative.
A few points:
1. I didn’t find this as inflammatory as other people did frankly because it’s true. Generally speaking, men are far less risk-averse than women. Whether that is based on the X and Y chromosomes, I don’t know. But I don’t find it a huge leap to say that being risk-averse leads women to make different investment decisions than men. Re-sorting your sample by risk-averse grading and running analysis again to remove gender as a factor, may show that portfolios that have similar results/rates of return so this article is kind of useless. It’s not about your gender but about your investment stomach for risk that is most important. (I am pretty certain that Financial Engines asks me my gender for life-expectancy reasons instead of my level of investment risk. They have another series of questions to assess that.)
2. It’s a ‘fact’, not a ‘factoid’. And I think the usage is wrong anyway. She’s presenting data and conclusions, but conclusions are inferred from the data and are not actually facts. A fact is that my hair is black and I have brown eyes. From that you can conclude that people who have black hair have brown eyes, but you’d be wrong in making that conclusion.
3. “A little knowledge is a dangerous thing. So if all you know is a little, talk to an investment profession, such as a financial planner.”
It’s true, a little knowledge *IS* a dangerous thing. But the word the author wanted is ‘professional’, not ‘profession’.
4. Lastly, her statement at the end is just ridiculous fantasy. It’s a too cute way to end the article and pretty dumb.
working together is so important. nothing works unless both parties are on the same page. both parties also need to compromise. if you’re on separate pages, forget it, because it just won’t work.