Investor stereotypes: Do women really do it better?

Noreen Rasbach
February 16, 2008

Years ago, I went to a consumer show for women to gather bags of free samples that used to be plentiful at those kind of shows.

I stopped at an insurance company’s booth and decided to take part in their promotion, which was to sit and talk insurance with a well-known local television anchor while being videotaped. I remember sitting under harsh white lights and having fun while a supremely well-coiffed man asked me some light and breezy questions.

Then came the stumper: He asked me whether I thought women had special insurance needs. I knew what the answer was supposed to be - “Why, yes, of course, women are so different from men!”- but I stumbled. Why should women be considered special or different? They had jobs and hobbies and money and families, just like men. I hemmed and hawed and finally said no. It clearly wasn’t the right answer. The interview ended shortly after.

I was reminded of that this week while doing some research into women and investing, looking into a study about how women fare better than men. To my amazement, when looking back, study after study from Canada, the United States and Britain over the past 10 years all reached this same conclusion.

One recent survey comes from the University of California at Davis, which looked at more than 35,000 discount brokerage customers between 1991 and 1997 and found that women’s portfolios earned 1.4 percentage points more than men each year. Economists attributed the difference to the fact that men shuffled their holdings more - about 45 per cent more - because of “overconfidence” and thus paid more dearly in fees.

When I decided to find out why, I learned there is a conventional wisdom about women and investing that also seems to be backed by those surveys: While women are less likely to invest than men, especially buying stocks directly, when they do they tend to be risk-averse, more patient and more likely to do their research.

Joanne Thomas Yaccato, a Toronto author who has written about investing and whose specialty is gender and business, agrees that there are “legitimate” gender differences when it comes to investing. Women, she says, tend to be value investors, looking to the long term, and usually seek out more information than their male counterparts.

“Education is the defining characteristic of a woman investor.”

But Ms. Yaccato takes issue with one key aspect of the female investor stereotype, saying the perception of women as risk-averse is “abjectly incorrect.” Give women the same advice and information and they will be as likely as men to make high-risk investments, she says. She has put this idea to thousands of financial planners and bankers over her 15 years of working with the financial services industry, and not one single person has disagreed.

I’m not big on stereotypes, particularly the men versus women variety, and especially the cutesy way they are often written about in the media - Mars and Venus, anybody? In my experience, smart and ballsy are adjectives that apply equally to men and women.

Ms. Yaccato believes the financial services industry has a stilted understanding of the female investor that becomes self-fulfilling: Women are being pitched - and sold - investments that are too conservative for their needs. That’s especially sad, she says, since women need to be more aggressive and take more risks in their investments to make up for the fact that they live longer and spend time out of the labour force to have children.

Ms. Yaccato has a good point about women living longer and jumping in and out of the labour force, one that should have been my answer to the insurance question that stumped me all those years ago. She also speaks to something I’ve seen over and over again with my friends: Women have a deep-seated fear of ending up poor and homeless. She believes it’s passed on from generation to generation. “Men are raised in the language of money - cars, money and fixing things - that’s just part of the culture. Somehow, women absorb this bag-lady fear. It’s very real out there.”

That fear will eventually drive women, though: They take steps to make sure it doesn’t happen to them.

As for the female investor stereotype, I have to accept that I once embodied the worst characteristic: Paying little attention to investing. I started too late.

Hopefully I’ll come to embrace the best: Getting better returns.

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