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Investing mistakes – the gender factor

Richard Loth

When it comes to investing, to err is human – but women are less likely than men to do so.This is the conclusion of a groundbreaking survey sponsored by Merrill Lynch Investment Managers (MLIM) of 1,000 investors during July and August 2004. The research firm of Mathew Greenwald & Associates polled households with at least $75,000 in financial assets and an annual income of at least $75,000. A Merrill Lynch press release of April 18, 2005, which announced the results of the study, carried this headline: “Make no mistake about it women get it right more often.”Robert C. Doll, Jr., president and chief investment officer of MLIM, highlighted the objective of the study by stating the obvious – men and women approach many things differently. He said “our survey brings new perspective on the attitudes, knowledge and emotions that influence investor mistakes. Male or female, our point is this: Understand the motivations and emotions that impact your decision making and you can make better, more profitable investment decisions.”Let’s take a look at some of the more interesting male-female investing comparisons.A little knowledge goes a long wayMale investors are much more likely than women to (1) buy a hot investment without research, (2) hold losers way too long, and (3) ignore tax consequences of investing decisions.On the other hand, as investors, women came out of this study as less knowledgeable and interested than men, but, as mentioned above, do make fewer mistakes and don’t repeat them as often. Merrill Lynch’s Hannah Grove points out that “everyone makes mistakes, but successful investors learn from theirs.”Get help when you need itEven though the study showed that women are less savvy than men regarding investment strategies, they are more apt to recognize what they don’t know and seek professional guidance for the answers. Grove adds that “the old stereotype that when men are lost, men will keep driving while women will ask for directions. Unfortunately, when the destination is financial security, late starts and wrong turns are costly.”Jane trumps TarzanMale investors are more likely than women to try and beat the market by a wide margin and to market time. Both of these actions are certifiably big mistakes. Investing machismo seems to make men more overconfident and greedy than women, which inevitably leads to a lack of coherence in an investment plan.Female investors have a tendency to be reluctant investors. The study’s results indicate that women wait longer to start investing than men. A large number of women – 60 percent – showed a marked preference for “spending as little time as possible managing their investments. This certainly must have gotten the attention of the marketing people at Merrill Lynch.A good Web siteMerrill Lynch Investment Managers has a special Web site – http://www.hindsight2insight.com – that was developed as an educational tool for investors. The site features a question and answer component with Hannah Grove. Her perspective on gender trends in the research we just discussed includes an interactive quiz as well as information on identifying and addressing critical investing mistakes. It’s a worthwhile exercise.In concluding our look at the Merrill Lynch gender-investing survey, it should be noted that while women seem to be less accident prone than their male counterparts, they are not immune from the behavior. For example, on the issue of overconfidence a significant percentage of women – 40 percent – were as guilty as the men of this sin. It’s just that the boys logged a whopping 60 percent.Whatever side of the gender fence you’re on as an investor, it’s imperative that you’re sensitive to behavioral influences. When it comes to investing, eliminating mistakes is as important as chalking up successes with smart decisions. The Investing Wisely column is written by Richard Loth, managing principal of Mentor Investing and an independent registered investment adviser. Loth can be reached at 827-5591 or mentorinvesting@comcast.net.Vail, Colorado


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