Investment Risk Tolerance By Gender
Our portfolio company Stash, which offers a super simple mobile investing app and has roughly 2.5mm users, did some analysis on male and female users to see if there was a material difference in risk tolerance between men and women on their service.
The conventional wisdom is that men are risk takers and women are more conservative.
Stash found that there really isn’t much difference between male and female users of their service when it comes to risk tolerance.
And they found that women are more tolerant of the highs and lows that come with being an investor.
Check out the data here.
Comments (Archived):
Comes down more to individual character than gender, I’d say.
are psychopaths and sociopaths more likely to be male?
The evidence is largely that women generate better returns both as personal and professional investors.1) 6.4% ♀, 6.0%♂ – Fidelity Study of 8 million personal accounts [1]2) 9.8%♀, 6.8% on avg – Hedge funds run by women outperform [2]3) Trading reduces men’s net returns by 2.65 percentage points a year as opposed to 1.72 percentage points for women. Study of 35,000 households.The reason generally seems to be that men are more likely to be trade too often (perhaps due to overconfidence), thus compromising returns. In world where passive wins, active males underperform.What is clear, regardless of disparities by gender, is that low fee, tax advantaged passive investing beats pretty much everything else. So the gender or individual who defaults towards that behaviour (and has a decent savings rate) wins.[1] https://www.fidelity.com/ab…[2] https://www.economist.com/t…[3] https://gsm.ucdavis.edu/res…
The reason generally seems to be that men are more likely to be trade too often (perhaps due to overconfidence), thus compromising returns. In world where passive wins, active males underperform.Perhaps the men see it more as a sport and ‘winning’ than the women. Men see it as a challenge to try and beat the house. Maybe this comes from sports.Men also in theory would be more likely to be envious of what other men have achieved and therefore be willing to take risks in order to be in the same place and not be looked down upon by peers or others. For women the game is really quite different. And we know this is still the case. Even today. People tend to not look at a women who is married to a successful man in the same way they look at a man (who does not work and/or has a less important career) that is married to a successful woman.
Why would men be more envious than women or feel more being looked down on by peers?
Well I have to question some of the conclusions here based on the way this is presented.For example this:It turns out women acted more sensibly on turbulent days. When Stash dug into the numbers, we discovered that it was male users who panicked. Men were 87% more likely than women, on average, to sell an investment. And that behavior continued into the following week, with male users still being 76% more likely than women to sell an investment, compared to female users.87% is a big number for sure.But can we really say that male users panicked? How do we know that the women were simply not paying attention to the market or thinking about it deeply?I would be curious what happens by age here as well. Retired people generally have more time and less distraction and would tend to be more up on day to day things (maybe they even listen to the radio or watch and react to CNBC for example) and hence might ‘panick’. If women (or younger people) aren’t getting the same info then they are not going to ‘panick’.Let’s compare it to health. You have one group of people that will look up symptoms on the Internet and therefore be more likely to ‘panick’. You have another group that does not panick simply because they don’t get information from the Internet. In this case it’s possible that if both groups read the same information they would react the same way but we can’t know that w/o knowing if they are reading the same info.Separately “Women are listening” seems to be very similar to the stereotype of men not wanting to ask for directions when they are lost. (Not sure how true that is btw but I have found personally that women are probably more likely to ask for help then men are…)
This is consistent with other research. Men tend to think they have to “fix” things. Women are more tolerant of that.
Anyone who thinks they can accurately measure Risk Tolerance in a bull market needs to study behavioral finance before they start a fintech co.
But I back-tested my algorithms!
are there many female crypto CEOs?
Risk tolerance in adults is more about couple psychology then gender, assuming most of their users are in active relationships (which most people are past their 20s). When one partner overcompensates in an area (risk taking), the other partner subconsciously responds by overcompensating in the opposite area (conserving). The same behavior is studied in homosexual male relationships where one partner will outperform the other in risk, even though they are both men with equal amounts of testosterone. So it’s not actually about gender (ie saying women are better investors, less panicky). In regards to your average public market investor- it’s more about the economy, jobs, and the resulting effect of how financial risk vs responsibility is being allocated in couples/families. Investing patterns change as these dynamics change. In relation to the products being offered by that company collecting the data etc etc other variables.