Men have a greater appetite for investment risk and are more confident about their knowledge of financial products.
If a volatile stock market is like a roller coaster ride, more men would ride in the front car and raise their hands in the air, according to the latest Millionaire Corner research that shows men have a higher tolerance for investment risk than women. Women would tend to avoid the rollercoaster altogether, or would tuck themselves into the middle car and close their eyes for the steep drops.
The current economic environment is likely to exaggerate this Mars vs. Venus divide between men and women and their attitudes towards investment risk, as indicated in our February study of more than 1,150 investors from a range of wealth levels.
Men show significantly higher levels of confidence in their investment abilities and are much more likely than women to describe themselves as “most aggressive” and “aggressive investors,” according to our survey. About 30 percent of men put themselves in the aggressive categories, compared to about 15 percent of women. A “most aggressive” investor seeks the highest returns and is willing to place all of his or her investments at risk. An “aggressive” investor is willing to place a significant portion of investments at risk in the quest for higher returns.
In contrast, more than 23 percent of women – compared to nearly 16 percent of men – say they are conservative and unwilling to place any of their investments at risk. More than 60 percent of women – compared to 55 percent of men - describe themselves as “moderate” investors willing to subject a limited portion of their assets to investment risk.
The current economic environment – shaped largely by concerns over a recession in Europe and slowing economic growth worldwide – is likely to exacerbate the differences between men and women investors and their varying attitudes toward investment risk. A greater share of men – more than 12 percent – say they will invest more aggressively in the current economic conditions, while less than 8 percent of women plan to increase their exposure to investment risk. More than 30 percent of women say they are likely to invest more conservatively in the near future, compared to less than 28 percent of men.
Tolerance for investment risk appears to be linked to individuals’ confidence in their own investment abilities. Men are more than twice as likely as women to say they are “very knowledgeable” about financial products and investments, 23 percent vs. 10 percent, respectively. At the other end of the spectrum, women are more than twice as likely as men to describe themselves as “not very knowledgeable,” more than 28 percent vs. 14 percent, respectively. Less than 1 percent of men say they are “not at all knowledgeable, compared to nearly 6 percent of women, leading to the conclusion that the higher tolerance of investment risk reported by men correlates with men’s higher levels of investor confidence.