Why He Jumps In And She Tests The Water

By Michael S. Rosenwald
Sunday, August 17, 2008

At home, my wife takes care of the utility bills, the checkbook, the grocery store coupons, the mortgage, and occasionally me. I take care of the investments. A few months ago, against her judgment, I moved some money out of a relatively safe, nicely performing mutual fund and into one that was more aggressive.

The other night I asked why she let me do such a thing, and she said, "I don't like dealing with that stuff."

A few minutes later, she added: "You'd better not screw it up."

Our household, it turns out, is like many others. Studies by numerous university economists and behavioral finance experts show that men and women, after all these years of growing closer together in the workplace, on athletic fields and in classrooms, are still somewhat far apart when it comes to roles in investing and to attitudes about where and how to sock away money.

A survey of American households performed by Iowa State University and presented to the NASD Investor Education Foundation found that in relationships in which couples didn't make investment decisions together, the men overwhelmingly took control. Women reported finding investing more stressful, less exciting and more difficult than men did. "The men are just much more comfortable than the women," said Tahira Hira, a consumer economics professor at Iowa State and author of the study.

Emily Chiang, an investment adviser at Alexander Randolph in Reston, thinks men still tend to dominate the investing world -- on Wall Street, among certified personal financial advisers (only 23 percent of whom are women) and in homes across America -- because of evolutionary psychology dating to the hunter-gatherer days. "Men are hunters," she said. "Women are more like gatherers."

What is fascinating about some of the research into how men and women approach investing is that when women do take more active roles, their behavior is far different from men's. These studies show that one of the most significant differences between men and women is their approaches to risk and how much they are willing to tolerate. Men tolerate more risk than women, which means that over time, women's returns could be less.

"Women sometimes take overly conservative positions, and sometimes then they don't make as much money as men," Chiang said. "It's true that most men are willing to take more risks than women."

In one illuminating report, Colorado State University researchers examined a large sample of household investment holdings and found that single women held 43 percent of their wealth in risky assets while single men held 51 percent. As their wealth increased, women devoted less money to risky assets than men did.

There are also studies that have shown that women prefer to invest in large-cap, slower-growth companies and that men prefer riskier, small-cap firms with big upsides. "The battle between greed and fear is involved in all investing," said Tracey Baker, a vice president at CJM Wealth Advisers in Fairfax. "There is a little more greed in the guys and a little more fear in the girls."

But perhaps because of that, there is a flip side: Women largely exhibit more self-control and rational behavior than men do when it comes to investment decisions.

"Men are more willing to make decisions without studying them," said Hira, the Iowa State professor. "They also feel like they can beat up the market. On the other hand, when women get involved, they are more diligent workers. They study. They talk. They learn. They don't have the urge to beat the market."

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