Who is better at long-term investing: men or women?
Q. My girlfriend says she’s seen news reports that say women are better long-term investors than men. I don’t think there should be a difference. Can you explain why?
A. There have been a host of studies over the years that show women have had great long-term success with investing.
The disparity in performance is often attributed to the fact that the two groups often look at investing differently.
Women tend to rely on their personal networks of family and friends and will seek out professional advice from financial planners to help guide them, while men are more self-directed and often use the internet to gather information and make investment decisions, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.
D’Agostini said women often have a longer term outlook, a calmer, more deliberate approach, and tend to stay the course during challenging markets.
“During the 2008-2009 crisis, men were much more likely to trade in their accounts, thereby cashing out at market lows, while women took more of a `buy and hold’ approach to investing,” D’Agostini said.
She said this is often attributed to overconfidence. Women tend to recognize that they don’t know something, and consult advisors to help and coach them, she said.
This while overtrading can hurt the return in a portfolio and eventually can lead to lower returns.
There is no need to monitor your retirement assets on a daily basis especially when you are years away from retirement, D’Agostini said, noting that women tend to have more patiencewith a longer time horizon and a goal in mind which can benefit them in the long run.
There could be something more.
“Hormones such as testosterone and cortisol could contribute to the reason for riskier investment decision, perhaps giving men more self-confidence and optimism, allowing them to become riskier investors,” D’Agostini said. “Women tend to be more risk-adverse then men and stick to their plan once they’ve educated themselves and consulted with their advisors fearing that they will run out of money and lose principal.”
D’Agostini said women may need to dial up the amount of risk they take on because women have longer life expectancies, and therefore will need their assets to last longer.
“A recent study showed that there wasn’t a significant difference in the returns of retirement accounts for men versus women over the past five years, but as a percentage, more women contributed to their accounts and at a greater percentage with a longer time horizon and goal in mind,” she said. “This can have large consequences over time.”