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Women and Investing: A Behavioral Finance Perspective
According to Merrill Lynch research, gender differences among investors tend to be overstated. In fact, the ways in which men and women approach their financial lives are often strikingly similar. Understanding who they are as investors can help women better focus on ways to successfully work toward their personal goals.
Executive Summary
Men and women aren't all that different—at least when it comes to their financial lives—says Merrill Lynch's head of Behavioral Finance
Gender stereotypes abound when it comes to finances. One of the most common misperceptions is that women are more conservative as investors, and men are more comfortable taking risks. Michael Liersch, head of Behavioral Finance at Merrill Lynch Wealth Management, busts that myth, and others, in his whitepaper, Women and Investing. His findings are based on the responses of more than 11,500 men and women to Merrill Lynch's Investment Personality Assessment1, as well as an array of published academic research. Here, he shares some key takeaways from the paper.
On Being Risk Averse
"When you control for factors such as age and lifestyle goals, the risk-taking profiles of men and women aren't all that different," Liersch says. What is confirmed by his research is that women are less likely to want to make regular changes in their investment direction just to try to improve returns. Fewer changes can result in an approach that can result in lower trading fees and may offer a slightly better overall return on investment.
Are women better investors than men? Research suggests yes. Watch Merrill Lynch's Head of Behavioral Finance Michael Liersch and U.S. Trust Investment Strategist Jackie VanderBrug explain how women's unique investing style is making them the new wolves of Wall Street.
On Financial Education
Yes, women tend to ask more questions than men do, but it's not because they don't "get" investing, Liersch says. They simply want to make sure that they understand the purpose of a recommended strategy and how it will help them pursue their individual goals. "These are important questions that every investor should be asking."
On Setting Priorities
A common question couples must ask themselves is: Are we investing for our family or for ourselves? "About half the time it's the woman who puts the family first, and about half the time it's the man," notes Liersch. "What should really drive investment decisions are your financial priorities, and those are very personal. They have nothing to do with gender." Taking the Investment Personality Assessment can help you identify what your true priorities are, Liersch says. He recommends that couples take the assessment separately to uncover any differences they may have in their priorities and preferred investment approach. "Answering its 27 questions will help you and your advisor create an investing approach that works for both of you," he explains.
A private wealth advisor can help you get started.
Find an advisor1 Includes data from more than 11,500 people who took the Merrill Lynch Investment Personality Assessment (IPA) between mid-December 2012 and mid-June 2013.
This article is provided for information and educational purposes only. Any assumptions, opinions and estimates are as of the date of this material and are subject to change without notice. Past performance does not guarantee future results. The information contained in this material does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account a client's particular investment objectives, financial situations or needs. Before acting on any recommendation, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice.
This information should not be construed as investment advice. It is presented for information purposes only and is not intended to be either a specific offer by any Merrill Lynch entity to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available through the Merrill Lynch family of companies.
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