Woman are better at riding out stock market crashes, while men are more likely to sell during lows, says the Sunday’s New York Times. “There’s been a lot of academic research suggesting that men think they know what they’re doing, even when they really don’t know what they’re doing,” said John Ameriks, a Vanguard exec who co-authored the study. (Kind of like how men hate asking for directions…)
Men’s overconfidence led them to trade stocks nearly 50 percent more often than women. “This added trading drove up the men’s costs and lowered their returns,” the story said.
It is interesting that the story and the researchers interpret men’s propensity for selling in a volatile market as overconfidence and not emotional weakness. I bet many people – men and women – who sold stocks as the market fell last year were motivated by fear. Fear that their investments, their retirement, and their future would be dashed if they didn’t do something about it.
The emotional pressure to survive a falling stock market may have been felt greater by men, who carry a societal burden to be breadwinners. That could be a factor in why men mistakenly sold off stocks more often then women. If there’s one thing I’ve heard about being a good investor, it is that you can’t make financial decisions based on emotions and come out ahead.
Men’s overconfidence, however, also led them to take greater risks than women, which can mean bigger returns. Women feel safer with the slow and steady earnings from bonds, apparently.
It’s unclear how significant these differences are, and the reasons behind it. Nature? Nurture? Or…? Researchers are studying how our emotions effect our finances and are looking at ties between testosterone and risk-taking. In the meantime, I’m holding onto what I’ve got.