Guadalupe Rodriguez is a seasoned professional investor who has pioneered new industries and is the CIO of Talipot Investments.
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Turns out many things we’ve been taught to believe as facts aren’t necessarily true: Coffee doesn’t stunt your growth, carbs are good for you and men are more emotional than women.
At least where investments are concerned, that is.
Most of us have been conditioned to believe that women are more emotional than men and that being emotional is somehow detrimental. Maybe this is why we have yet to see a female president of the United States, have just over a scant 10% of the Fortune 500 being run by women (even though that’s been deemed a milestone), and until only recent years, the finance industry has been believed to be somewhat of a boy’s club.
But according to behavioral economics (paywall), men are more emotional than women when it comes to investing. Being in touch with their feelings can give women a great advantage in financial investments. Yet being too emotional can be dangerous, especially in times of high market volatility, like we’ve seen in the world market for the past three years.
Terrance Odean, a finance professor at the University of California who studied stock picking, conducted a seven-year study that found female investment groups outperformed male investment groups by 4.6%. Overall, women outperformed men by 1.4%.
Investment advisor Adam Hennick conducted a study in Canada that found that men were more likely to buy stock based on a hunch or gut feeling over women (13.7% to 7.5%) and that 34.2% of men would buy stock based on a friend’s recommendation over the 27.8% of women who would.
It appears if anything can bring out some pretty prominent, impacting feelings in men, it’s money.
While emotions direct many men to make abrupt decisions, sometimes leading to financial loss, emotions shouldn’t be eliminated from the equation when making financial decisions. In fact, emotions play a key role in economic strategies, particularly investing.
Even as culture has grown to accept a holistic approach in handling nearly any aspect of life, there remains the myth that leaders detached from their feelings lead well and that investors only need to cling to reason and logic to gain returns.
Where many men can fall short of acknowledging and listening to their emotions, they can fall short in their return. When it comes to investing, men could learn a thing or two from women.
Men are generally characterized as not holding too much weight in their emotions, yet their emotions are often highly invested in their investments. Rash decisions are most often led by anger, ego or fear. Some are even easily swayed by a colleague’s suggestion without doing research on their own.
When it comes to money, men often report being more confident with money than women (although that gap is quickly closing). However, Hennick’s study found that 69.2% of high-income male investors regretted investment decisions that were based on emotion. Despite that, men are generally less likely to second-guess themselves, while women typically take time to think things through and research before making a big gamble. A rush in investments can lead many to make hasty decisions and forgo questioning the pros and cons before committing, ultimately leading to potential regrets.
Odeon also suggests overconfidence is the biggest issue leading men to make bad investment decisions. Men trade more than women, lose more and find themselves in a so-called stride that may be hard to break. Second-guessing may feel like a lack of confidence when really the research shows that extra moments of research only secure your confidence further in making the right choice.
Ever been told, “We’re hunting, not shopping” when at the store? While many men tend to fall into the hunter role of the hunter-and-gatherer paradigm, rather than being the let-me-shop-around type, a little more time shopping around may be precisely what men need.
A survey conducted in 2021 in the U.K. found that female participation in online stock trading or investments was notably lower at 29%, compared to the participation of men at 47%. Shopping around may seem like a waste of time, but overconfidence can lead men to trade more, research less and get less in return. Women, on the other hand, found better returns while saving on transaction costs and capital gains taxes. A little leisurely shopping just might boost your return in the long run.
Now before we end this therapy session, this is just a reminder that may seem trivial—but all of this research proves this simple tactic is sometimes lacking among male financial prowess: feel your feelings. Understand where they are coming from, why they’re there and what to do with them before you allow them to push you into another impulsive trade or investment without really considering the costs.
One reason women may be better at this investment game is simply that emotions tend to be less foreign to them. By engaging what it is you are feeling, you can better guard when and how these emotions control you and your bank account.
Getting a little more in touch with your emotions may take some practice, but you just might find your investments prove to be a bit more stable and profitable in the long run. For starters, take account of poor judgments you have made out of emotional responses and the red flags that led you there. Learn to accept your emotions and recognize their impact on your financial decisions. Learn to regulate these emotions rather than repress them.
Sigmund Freud said if a feeling is ignored and repressed, it’s bound to boomerang back to you one way or another. So before you allow these emotions to take the reins in your investment, don’t ignore how what you are feeling may be impacting how you’re investing.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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