Women & Investing: What Men Must Know

I started writing this article addressing women readers and why they must take control of their investment decisions instead of leaving it to the men to do it all.

But then, after a very sensible advice from my wife (and I’m saying ‘sensible’ without any pressure to say so) :-), I changed the content of this post to address the men…

…and what they should know about “women and investing”.

Note that I’ve used “women and investing” together simply because, as my wife says, while I understand investing, I don’t understand women! And I believe, she is right.

So here I am writing some of my thoughts on “women and investing”, and why all men must take note of it.

But first, why is this article for men and not directly for women?

Well, I provided the answer above. Like the woman in my life, the one in your life will always think that you don’t understand her.

So I’m trying to act as an outsider by suggesting that it’s high time you start understanding her – and give her the rightful importance – when it comes to managing money.

This is because, however you may deny it, the harsh but honest truth is that a woman’s brain is wired better than a man’s brain when it comes to handling money.

Again, this isn’t something I’m saying to impress my wife. It is scientifically proven that women tend to be better investors than men.

Women and Investing: What Men Must Know
“The masters of the universe have turned out to be masters of disaster,” wrote noted investment writer Jason Zweig in a thoughtful 2009 Wall Street Journal column.

“No matter which aspect of the financial crisis you consider, there is a man behind it. So, it is worth pointing out, how different things might be if the financial world were female.”

Here is how Zweig explains his rationale for giving the reigns of the financial world in women’s hands…

In the testosterone-poisoned sandbox of the male investor, the most important thing is beating the other guy; the second most important: bragging about it. The long term is somebody else’s problem, and asking for advice is an admission of inferiority. Worrying about risk is for sissies. Leverage is good, since it raises returns — while the market goes up. Is it any wonder the male-dominated world of Wall Street has boomed and busted every few years for more than two centuries?

Women, by contrast, put safety first. Even after controlling for age, income and marital status, women are more inclined than men to wear seat belts, avoid cigarette smoking, floss and brush their teeth and get their blood pressure checked. They even have been shown to be 40% less prone than men to run yellow traffic lights.

Women are less afflicted than men by overconfidence, or the delusion that they know more than they really do. And they’re more likely than men to attribute success to factors outside themselves, like luck or fate.

What Zweig has written is of paramount importance for men who have ever doubted that the financial matters are best left to them alone, and that women are better off concentrating on their homes, children, or jobs.

In all, what Zweig tells us is that women possess some inherent qualities that make them better equipped to handle the emotional subject of money…

• Women are more risk averse than men, and don’t go all out for the “kill” (and you know that it’s the “kill” that has caused all the past financial crises);
• Women are better at self-control and are less overconfident (great advantages that any investor must have);
• Women are calm, have a higher degree of acceptance, and are generally more satisfied (all great qualities of a successful investor).

Bottomline is…
See, as much as it may sound, the core idea of this post is not to prove why women are better than men at handling money.

My big idea here is that your household’s investment portfolio will be less risky and more well-constructed if your wife helps manage it.

After all, if she will benefit from what comes out of that portfolio 10-20 years down the line, why not let her share her ideas in what goes into creating the portfolio?

To start with, let her clearly know about all your financial plans and how you’re working to achieve them.

Then, ask for her views and suggestions on how she would have gone about doing it. After that, together work on a financial plan based on your combined thoughts.

I’m sure you’ll be amazed at how your financial life will look simpler when you work on it together.

I also sincerely believe that her financial ideas and emotions (of playing it safe) will complement yours (willingness to take high risks)…and you will both end up wealthier in the long term.

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