Are Women's Portfolios Better Than Men's?

By Sham Gad | August 10, 2012 AAA

The investment industry is still a male-dominated game. The vast majority of money managers, analysts and bankers are male. While more women than ever before are achieving success in the business world, some of the world's biggest companies have female CEOs, including PepsiCo, Hewlett Packard and IBM. Even Facebook has a female Chief Operating Officer - Sheryl Sandberg. Women are also making a difference in the investment world. Every year, Barron's publishes a list of the top 100 female financial advisers in the industry. This list is a good sign that women are playing increasingly larger roles in a business traditionally dominated by men.

SEE: The Myths And Realities Of Women In Finance

Are Women Better Investors?
There have been a few publications that suggest women are safer investors. In 2011, a study by Barclay's Capital suggested that women's portfolios perform better than men's do. The study refers to the fact that women, by nature, tend to be more cautious than men, as women generally prefer more buy-and-hold assets over riskier ones. The study adds that women tend to be more protective of their belongings, wear their seat belts more often and put a greater value on self-possession than men do. These attributes suggest that women also care more about safety. This risk aversion likely helps shape the investment portfolios of many female investors.

SEE: How Do Women Compete In A Man's World?

Research shows that most men tend to embrace risk more than their female counterparts when it comes to investing. A study conducted by professors from the University of Colorado in 1996 showed that men were more likely to hold riskier assets and that the percentage of these investments were higher in men's retirement funds than that of women's. In 2009, The Wall Street Journal set out to answer the question of what sex was the better investor. Two finance professors concluded that, on average, a woman's investment portfolio outperformed a male investor by one full percentage point. They determined that women, by nature, put safety ahead of most needs and that this habit carried over into investing. As a group, women are more concerned with avoiding losses than men are.

SEE: Women And Finance: Is There A Gender Bias?

The Bottom Line
The idea that men are more capable than women in becoming successful investors is nonsense. Warren Buffett, perhaps the greatest investor of all time, said that the most important thing in investing is to avoid losses. In other words, Buffett is suggesting that financial safety and risk aversion are important factors in ensuring a successful investment career. Therefore, it seems that many women already have a leg up on men due to their natural aversion to risk.

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