There are countless studies out there trying to answer questions about how – and why – men and women invest differently. Do men tend to take more risks? Are women better at committing to a long-term strategy? Should advisors take different approaches with men and women as a result? A comprehensive study performed by Merrill Lynch offers a somewhat surprising, but also no-nonsense explanation when it comes to finance and investing—men and women aren't all that different.
Human beings, no matter what their gender, all share a common trait that can affect how we make investment decisions – our emotions. On the other hand, the strengths of a good investor, such as patience, analytical attention to detail, and long-term focus are common across both men and women.
In this post, we will take a look at some of the findings of Merrill Lynch’s research paper, titled “Women and Investing: A Behavioral Finance Perspective.” Perhaps the most important finding of them all, however, comes straight from the lead researcher and Head of Behavioral Finance at Merrill Lynch Wealth Management, Michael Liersch: “What should really drive investment decisions are your financial priorities, and those are very personal. They have nothing to do with gender.”
There is No “Typical Investor”
In Merrill Lynch’s study, the variance of responses made it clear that there is no “typical investor.” Some surveyed care most about being able to have access to their investments; others put a premium on portfolio protection; while others said that family needs or emergency cash were the more important considerations.
There were some areas, however, where a majority of female respondents landed on the same page. More than 80% of women said they believe the past benefits and risks of investing are likely to continue, and they believe they can adjust their lifestyles if necessary to meet investment goals. In what is a fundamental tenet of investing, most women understood and agreed with the notion that reaching investment goals would require some degree of taking risk.
The study suggested that men’s approach to investing could to be overconfident at times. That has potential to lead to taking on too much risk, which can adversely impact an investment strategy. Women, by comparison, tended to be more risk averse.
Every Single Investor Needs Their Own Personal Plan
Do men and women invest differently? Everyone’s needs are different. We all have different financial circumstances, different end goals and visions for retirement, and different ideas for how to get there. Financial advisors should recognize that and work with each individual as just that, an individual.
One of the common threads found in the Merrill Lynch study, it follows, is that nearly 100% of participants, regardless of gender, said they desired the support of an experienced advisor or money manager to help in making productive investment decisions. At WrapManager, we believe each client is unique and therefore deserves a unique investment plan and a unique investment experience. That’s our approach. You can learn more about it by calling us today at 1-800-541-7774 or by emailing us at wealth@wrapmanager.com.
