How different are men and women as investors? Research is limited. While many articles exist, they often cite the same studies. There’s little high-quality research in top journals due to data availability issues and changing times. Some suggest that within-gender differences matter more than between-gender differences.
Women seem to invest better than men, at least on a risk-adjusted basis
Women’s trading decisions seem better overall, especially on a risk-adjusted basis. Studies show female underperformance in non-risk-adjusted situations, often attributed to women’s preference for lower-risk portfolios. For instance, a Fidelity study discovered that women outperformed men by 0.4 percentage points annually over a decade.
Do women out-invest men due to better choices or less trading?
Notable gender differences in trading behavior exist. Studies such as “Boys Will Be Boys” indicate men trade 45% more than women, which impacts returns. Women-led investment teams tend to outperform male-led ones, and mixed-gender teams perform even better.
Women don’t invest enough
Women’s participation in investing remains low, leading to reduced retirement wealth. Lower earnings and gender bias play roles. Nevertheless, trends show progress, with an increase in investment outside retirement accounts, especially among millennials.
Women are catching up quickly
Gender dynamics in investing are evolving rapidly. Inheritances are projected to empower US women, potentially controlling $30 trillion by the decade’s end. More married women are making investment decisions, and investment outside retirement accounts is on the rise, particularly among younger generations.
Women may not be as inherently risk-averse as believed
While research indicates women are often more risk-averse in various contexts, this trait doesn’t always hold true in investing. While US women exhibit higher risk aversion, global studies and recent research question the extent of this behavior.
Women have lower financial literacy
Participation disparities may stem from lower financial literacy among women. Research suggests that women invest as eagerly as men when controlling for financial literacy. Confidence issues could relate more to financial literacy than inherent risk aversion.
For more in-depth reading, “Women and Finance” (Capelle-Blanchard and Reberioux, 2021) provides insights into the significant role of nurture as the primary differentiator between male and female investors.