Business

The Battle of the Sexes—

Overcoming the gender differences in investing

YaniqueLeiba-Ebanks

Sunday, November 19, 2017



In my book titled “Memoirs of a Financial Advisor”, just joking — I have no such book! However, over the years, dealing with men and women has been a fascinating exercise. And certain key things have been consistent over the last 17 years.

Firstly, the vast majority of my clients are male. Without fail, this is the one area in Jamaica where men are the majority.

In my experience, men take their investments very seriously; they really get to know their investment advisors and are always enthused about the latest exciting venture.

Sorry to say it, but oftentimes, men are very impatient. The worst thing you can tell them is that you are not seeing anything attractive on the horizon. Even if the timing is poor, they dislike the idea of staying in a cash investment. They prefer something with risk, preferably something that their friends are also investing in.

The research has shown that men tend to go for shorter-term investments, and trade far more often than women. This can work to their disadvantage, as more fees are incurred than those associated with a longer-term strategy. They also tend to be more confident in their decisions, whether rightly or wrongly (or to put it another way — occasionally overconfident!)

While it may appear that this article is criticising the way men invest, the truth is that men are generally far better prepared for retirement than women, they have far more funds invested, and they tend to be more knowledgeable about investments.

This was corroborated at the VM Pensions Seminar where the presenter gave data to support the fact that Jamaican women are far less prepared for retirement and are in fact more likely to end up in poverty upon retirement than men. Most data sources are from the United States, but this was the first time the Jamaican research was presented.

Why are women more likely than men to end up in poverty during retirement?

Well, women are at risk because they typically earn less than their male counterparts, they are more likely to take a break from the working world to stay home with children (this is more typical in an American context), and they are far more conservative.

As if that wasn't enough, women spend more on their children's needs and on household expenses and enhancements. They are known to be good savers, but they keep a lot of money in cash and low- risk investments. This keeps the money safe, but it won't grow to provide for their needs later on in life.

And finally, women are apparently not as educated about investments as men; a fact that makes them even more cautious about taking on any risk.

What does this mean for men and women? Both genders have desirable investing habits that would benefit the other side. A woman's natural caution can temper the overconfidence of the male and would likely lead to better investment decisions.

Likewise, if women educate themselves more about investments and take more risks, it would enhance the value of their portfolio and place them in a better position to retire.

Men have an advantage over women in retirement because they die sooner!

The frequency of trading comes at a high cost for men. If they could employ a more long- term strategy with less frequent trading, it could benefit the growth of their portfolio.

Men have an inherent advantage over women, in that they tend to die before the women. You may be shaking your head now, but this makes a significant difference to the amount needed for retirement, so it is that much harder for women to prepare adequately for the golden years.

What should you do about this? Well, I can't give you advice on living longer or shorter! However, armed with the knowledge, you can better prepare for those days.

In summary, it may suit both genders to learn to work together to achieve their financial goals.

The benefits of complementary investing styles will maximise the strengths and minimise the weaknesses of each gender.

Happy Investing!

Yanique Leiba-Ebanks, CFA, FRM, is the AVP, Pensions & Portfolio Investments at Sterling Asset Management. Sterling provides financial advice and instruments in US dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm Feedback: If you wish to have Sterling address your investment questions in upcoming articles, e-mail us at: info@sterlingasset.net.jm.

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