Do women invest differently than men?

Whether women invest differently to men has long been one of the favorite questions in economics. It often concerns risk tolerance, portfolio composition or basic investment knowledge. In the following, we examine whether one gender produces successful investors more frequently and whether both genders benefit from the financial expertise for which Switzerland is actually known.

Investment behavior

Various studies show that men trade or change their investment strategy more frequently. This is shown, for example, by the well-known study «Boys will be boys: Overconfidence and common stock investment» by Barber and Odean. The authors are based on the principle of «overconfidence», i.e. excessive self-confidence, or one could also speak of overconfidence. When investing, an overconfident person would overestimate the security or the expected profit of a trade. Overconfidence naturally occurs in both genders, but according to the authors it is primarily a male problem when investing. The authors' empirical study confirms this assumption: the men studied changed around 77 percent of their portfolios within a year, while the women only changed 53 percent. Due to the infrequent restructuring, the women in the study also enjoyed a higher average return.

It is not only the frequency of restructuring that depends on gender. Further differences can be found in the Marinelli, Mazzoli and Palmucci study, among others. The researchers examined the customers of an Italian bank, who answered a questionnaire on the subject. The researchers also had access to detailed customer data in order to include other aspects of behavior. Here too, the results were clear: differences between the sexes are visible and significant. For example, men accept a higher risk, trust professional advice less and tend to speculate more. However, the quality of the portfolios, which the researchers define in terms of liquidity and diversification, hardly differs.

Knowledge about investing

There are also still significant differences in financial knowledge today. Financial knowledge is particularly important when it comes to investing, as it can not only influence investment strategy and behavior, but can also sometimes determine whether a person invests their money at all or not.

Financial knowledge is usually measured using a short questionnaire. In an international comparison, Switzerland ranks relatively well, but a study by Martin Brown and Roman Graf shows that there are also clear differences between the sexes here, as the women surveyed gave incorrect answers more frequently than the men. One possible explanation could be that there are still households in which it is mainly the man who deals with financial matters. However, the study argues against this theory, as married women scored better on average than single women.

The fact that women in Switzerland also have a lower average level of financial knowledge is a problem that has individual and macroeconomic consequences. This is because inadequate or incorrect knowledge can quickly lead to poor decisions.

Automation helps

Our own data also confirms the conclusions of the studies. On average, our female customers have a lower risk tolerance and state more frequently that they have little or no experience with investing. This could either be due to the fact that they actually have less financial knowledge or that men rate their own knowledge higher. We will look at our own data in more detail in a later article.

In short, women may initially be at a disadvantage when it comes to investing their own money, as they are less concerned with financial issues and less confident and consequently often do not invest at all. But if they do, they tend to be at an advantage, as consistently sticking to an investment strategy generally has a positive effect on returns in the long term.

Online wealth management such as True Wealth and other robo advisors therefore help both men and women, but for slightly different reasons. In any case, they take over the hard work of stock selection and trading and ensure diversified and cost-efficient asset management. Specific financial knowledge takes a back seat; it is much more important to be aware of your own investment goals.