This is a guest post by Dong of AskDong.com, who works in the power industry, but spends alot of his spare time giving often unsolicited and unwanted financial advice to his friends.
The other night, I was in a heated discussion with my girlfriend about women and investing. I told her, “women don’t invest as much as men because they’re risk averse.” She didn’t take my comment well, and called me a Larry Summers wannabe. Like Summers, the controversial former president of Harvard University, I decided to find some studies to back up my claim.
Of course, I found another study that said there was no significant difference in investment style between men and women.
My girlfriend agreed with my assertion that women are in general less interested in investing than their male counterparts. However, it was her opinion that this was due to the fact that the financial industry has been historically male dominated, resulting in fewer female role models, rather than any innate difference in risk tolerance.
Sharebuilder conducted a study in 2007 and found the following highlights:
- 41% of women have brokerage accounts vs. 55% for men.
- 77% of women participate in work retirement plan vs. 83% of men.
As with any broad survey, there are a number of factors at work and probably should not be taken just at face value. A gap does exists. Either men are investing too much or women are not investing enough. While you can invest badly, investing in itself is almost always a positive.
It looks like women are not exposing themselves enough to the financial market in comparison to men.
In the end, it doesn’t matter what the root causes of the investing gender gap are. Even if women are inherently more risk averse than men, I don’t think that’s a bad thing. It may be that men are predisposed to taking too much risk because of a false sense of confidence. Investing in the NASDAQ during the height of the dot.com bubble was not exactly the brightest thing to do. I’m sure more men than women were burned because of self-perceived investing prowess.
When it comes to investing, it’s about the appropriate level of risk for one’s particular life situation. In that regard, it would seem that younger women need more encouragement to expose themselves to the financial markets.
While I find David Bach’s “Smart Women Finish Rich” series somewhat annoying, I’m glad to know that he has made a difference for many women who were otherwise not ready to step up to the investing world (my girlfriend found the book enlightening and recommends it to all her girlfriends).
Below are some interesting links I came across that discuss some of the financial differences between men and women. I hope you find it equally enlightening.please add your thoughts now! }