How Investment Works In Mars vs. Venus
Ever heard of Geraldine Weiss? How about Hetty Green? Or even our very own first female Bank Negara Malaysia’s governor, Tan Sri Dato’ Sri Dr. Zeti Akhtar Aziz? They are just some of many notable female figures in the finance sphere but when speaking of finance, chances are the mind conjures an image of men in suits looking dapper, brimming with self-confidence and exuding an air of success.
Historically, women have had less involvement in financial matters, but what else separates men and women when it comes to their approach to finance?
To shed some light on the sophisticated relationship between women, men and money, here some areas that men and women differ when it comes to personal finance.
Men are often considered to be greater risk-takers (i.e. higher risk appetite) when it comes to matters concerning finance. Evaluating data from more than 8,000 men and women in 2010, the German Institute for Economic Research (DIW) found that 45% of men have risky investments such stocks compared to 38% of women.
Despite these findings, however, the DIW believes that this has more to do with the fact that women generally have less funds to invest, compelling them to be more cautious rather than a generalisation that women are naturally averse to risk.
A 2016 salary survey report by the Department of Statistics, Malaysia seems to confirm DIW’s opinion that men earn more than women (although not by much). The survey revealed that the mean monthly salary of men was at RM2,500, while women were still earning less at RM2,398.
Research conducted that same year by a management consulting firm, Oliver Wyman, recorded only 15% of chief risk officers (CRO) were women, while only 10% were CROs in the banking sector.
This was attributed to the lesser amount of women graduates in technical subjects compared to men, as careers involving risk management require strong technical background.
Secondly, the fact that women are known as the primary caregivers to children feeds the perception that they are incompatible for such roles, as many think dealing with risk requires being on ground and hands on around the clock.
Other factors include the stereotype of women being unable to handle a confrontational role when facing difficult situations and that women do not fit the usual mould of such jobs.
Level of confidence
The measure of confidence where money is concerned appears to be who men and women decide to work with and the characteristic of their financial decisions.
According Circle Wealth Management’s partner Ann Kaplan, women place utmost value on working with a trusted advisor and take longer to arrive to a decision – which implies lower self-confidence but a more careful and calculated decision.
In contrast, men tend to be overconfident, which may not necessary bring positive results, as they are more inclined to make snap decisions and will work with anyone they believe can earn them a higher return.
However, a study by the German Comdirect Bank and the DAB reveal that lower confidence in women does not translate to poorer investment choices and management. A sample of half a million portfolios demonstrate that in 2007 and the subprime crisis year of 2008, women did 4% to 6% better than men.
A 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.
Based on the same study, it is also documented that funds managed by male fund managers are more likely to achieve extreme performance ranks, as opposed to their female counterparts. However, the latter’s performance is more persistent. As the age-old investment advice goes, the higher the risk, the higher the return.
A contributing factor to the different approach to finance by men and women could simply be due to the fact that finance is widely regarded as a male-dominated profession. Although progress is made throughout the years, women are still behind their gender counterparts.
According to a recent November 2017 Catalyst research on women in S&P500, specifically in finance and insurance, 6.8% are CEOs, 29.1% are executives or senior-level managers, while 47.1% are first or mid-level officials and managers.
A 2016 survey conducted by recruiting group, Hays, revealed 28% of 11,500 Malaysian women believe they will feel successful upon landing senior roles, such as managing director or chief executive officer. However, respondents of other countries were recorded with a lower chance of feeling as such, with 17% in Japan, followed by China (14%), Singapore (12%), UK and Australia (both 11%).
Regardless, men still continue to thrive in Malaysian workplaces as 89% of the survey respondents stated males sat in most senior roles, while 59% revealed their line managers were also predominately men.
Christine Schmid of Credit Suisse believes that women gravitate to where there are other women which could further explain the figures above.
The inequality is glaring but the barrier appears to be eroding. In Malaysia, the number of female professionals who are actively contributing to the development of Islamic finance is growing. An article published by Executive Chairman of Cambridge IF Analytica, Dr Humayon Dar, listed five out of the top 10 women in Islamic banking and finance were Malaysians.
So, the jury may still be out on the question of which gender is better at money and investment. It is also a question that most academics are trying to find an answer to.
However, it is undeniable that women are beginning to get in the game of investment and emerging as a force to be reckoned with in the financial world.
Putting aside the question of who is better, let’s settle for both genders approach investment differently. As the American author and relationship expert, John Gray said, men are from Mars, and women are from Venus — naturally, there are distinct differences between men and women.
Want to get into the exhilarating world of investment? Read about unit trust investment for beginners here.
If you are the risk-averse type, find out why sometimes it pays to take a leap of faith with bonds investment.
This article was first published on January 29, 2014.