Men are much more confident than women when it comes to investing, but do they make better financial decisions?
Men are much more likely than women to describe themselves as very knowledgeable about financial products and investments, but that confidence might not always translate into the best financial decisions, according to Millionaire Corner research on the attitudes and behaviors of wealthy investors.
Nearly one-fourth of men, compared to 10 percent of women, said they were “very knowledgeable” about finances, in a survey of 1,153 investors conducted by Millionaire Corner in February. More than 60 percent of men said they were “fairly knowledgeable,” compared to 55 percent of women.
Women were twice as likely as men to describe themselves as “not very knowledgeable,” 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.”
Men also put a greater premium on financial knowledge than women. More than 45 percent of men said the financial knowledge was “extremely important,” compared to just over 35 percent of women. Men say they rely most on their own research – such as reading company reports and fund prospectuses – when making financial decisions, while women put more stock in advice from a financial professional. More than 44 percent of men said their independent research is the most important factor when making investment decisions, compared about 30 percent of women. More than 43 percent of women say input from a financial advisor is most important, compared to about 35 percent of men who consider their financial advisor the ultimate source of financial information.
Women rely much more heavily on friends and family members than do men when making investment decisions, nearly 9 percent compared to less than 1 percent, respectively, while men are slightly more inclined to check out financial websites provided by a variety of sources.
Though men consider themselves to be steeped in knowledge when it comes to making financial decisions, they also report a greater tendency to make decisions “based solely on emotion” without any research, background investigation or recommendation from a trusted source. Nearly half the men participating in our May survey of more than 1,160 investors said they made impulsive investment decisions, compared to one-third of the women.
Investors rated the success of their emotion-based investment decisions as 44 on a 100-point scale – in other words, a failing grade. The results indicate that investor confidence can, in some cases, be too much of a good thing. Our research also shows that men are significantly more likely than women to indulge in emotion-based investing, a common pitfall of “overconfident” investors.