Men are financial daredevils who like risk and women are cautious and want security — that's the standard cliché, relatively speaking. Said another way, men are thought to be more risk-friendly than women. Or to rephrase the title of a bestseller, "men buy shares from Mars and women have a savings account on Venus."

Differences Between Men and Women on Investing

Articles published in the Swiss Neue Zürcher Zeitung (NZZ) and in various other sources, shed some light on the combination of myth and reality in these gender-focused financial differences. In an interview with the NZZ, Christine Schmid of Credit Suisse explains that the sub-discipline of gender finance deals with the social differences between men and women. Anja Peter, of Bank Coop in Switzerland concurs that "naturally, there are differences between men and women, biologically and socially, and this is reflected in investment behavior."

For instance, women are generally more interested in such issues as ecology, ethics and microcredits. However, when it comes to the crunch, this interest does not always have an impact on the actual investment decision.

Another study conducted at the Centre for Financial Research at the University of Cologne found that female fund managers switch around their portfolios less than their male colleagues. Furthermore, women's strategies and the subsequent performance tend to be more stable.

Historically, women have had less to do with financial decisions than men and their investment volume has also been lower. However, that is changing.

(Find out about one lady that bucked historical trends in Hetty Green: The Witch of Wall Street.)

Women and Risk Aversion

Recent studies have also examined the typical investment behavior of women. The German Institute for Economic Research (DIW) evaluated data from more than 8,000 men and women.

At first glance, the study seems to confirm the standard view, but not all that strongly, as 38 percent of women are invested in risky financial products such as stocks, whereas it is 45 percent for men.

However, the DIW does not believe this confirms an inherent risk aversion on the part of women. A regression analysis reveals that women would take more risk if they had more money. Women generally still have only have about half as much to invest as men, which inevitably compels them to be more cautious — that may be the real reason for the apparent risk aversion.

Financial Career Barriers and Education 

In the same vein, there are still few women applying for jobs or working as financial researchers or brokers. Schmid believes that women continue to gravitate to where there are other women, but hopes that these barriers will break down over time. Clearly, there is a link between the career side of the gender equation and investment behavior.

Interestingly, studies by the German Comdirect Bank and the DAB reveal that while women have less confidence in their financial knowledge than men, this is not matched by poorer investment choices and management. The study revealed that 58 percent of men rated their financial understanding as good or very good, but only 47 percent of women said the same. Furthermore, a large sample of almost half a million private portfolios demonstrated that in 2007 and the crisis year of 2008, women did four to six percent better than men on average.

Women in Investing Moving Forward

Over time, these differences are likely to decline, but not disappear altogether. After all, there are centuries of entrenched gender roles, and elements  of those still remain — and to some extent for the foreseeable future. Also, since women are genetically the child bearers, some aspects of the male-female roles are intrinsically fixed by nature. Thus, more women than men will still find it harder to invest in the true sense of the word.

Nonetheless, we can certainly expect many of the behavioral trends to diminish. After all, never before have there been so many highly-qualified women who earn well, have money to invest and want do so securely and optimally.

This in turn will lead to a number of new programs that focus on female investors. The International Finance Corporation's "Banking on Women" program is a classic example, and has been followed by many others over time. The presence of female investment clubs constitutes another sign of the times.

Barbara Aigner, of Emotion Banking in Austria, believes in a specifically female customer segmentation, which looks like yet another way ahead.

She divides the female customer segment into three groups:

  • "self-conscious, pleasure oriented" younger women
  • "interested and open-minded active" women who are more interested in what the bank offers
  • "traditional conservatives" who are loyal and risk averse

The Bottom Line

It is really only in the past century or so that women have successfully broken down many of the barriers in a male-dominated world. The role to which women have been relegated has constrained both their financial knowledge and activities. This situation is changing constantly.

Nonetheless, some of the clichés remain entrenched in the mind and some elements of the old role inevitably have stayed intact. In any event, understanding gender differences and how they are changing over time is fundamental to understanding and managing the world of investments.

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