Study debunks myth of gender-based differences in investing behaviour
Myths about the innate differences between men and women when it comes to investing behaviour and performance are debunked in a new report published by the Merrill Lynch Wealth Management Institute.
A study of 11,500 investors found that while men and women differ in their approach to investment decision-making, gender is less a determinant of investing success than other social, demographic and circumstantial factors.
The Merrill Lynch report, “Women and Investing: A Behavioural Finance Perspective,” suggests that the basis of previous research, which focuses on investing behaviour of men versus women, has relied on stereotypes that are limiting in scope. The goal for researchers and advisors is to move away from gender comparisons and instead focus on women’s varied and unique perspectives.
Numerous studies have found that compared to men, women are more averse to investment risk, less engaged in investment decision-making, trade less often and establish investment goals that put the needs of family and community ahead of personal needs.
Merrill Lynch analysed the behaviour and preferences of women investors through a wider lens of social and demographic factors, and found that men and women are far more alike than many people have thought.
Eighty-five per cent of women agree that risk-taking is beneficial, and 81 per cent of women feel they can adapt to changing market conditions and investment outcomes.
Men and women who have a similar level of financial knowledge share similar risk behaviour. The greatest differentiating factor among investors is their perceived financial knowledge, and women are more likely than men to say they have lower levels of financial knowledge. More than half (55 per cent) of women, but only 27 per cent of men, agree they know less than the average investor about financial markets and investing.
One half (50 per cent) of women and 55 per cent of men want to be personally engaged in making investment decisions.
Approximately one half of women (51 per cent) are concerned they might not reach a key investment goal: having enough money for the rest of their lives. While 58 per cent of women say their focus on investing is to meet the needs of their family, more than 40 per cent said they do not feel they should put financial support for other family members ahead of their own goals.
“Our research reinforces the importance of concentrating on the unique, personal goals of each investor. Doing so can identify a deeper understanding of the individual’s concerns and priorities which may better align investments to achieve the outcomes the investor desires,” says Michael Liersch, head of behavioural finance for Merrill Lynch Wealth Management. “We believe we need to change the dialogue with both men and women, to discuss what really matters to them and what they want their investments to achieve.”
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