Women are more risk-averse as investors

41 Replies

@Holly Williams - Actually, for married couples- I totally agree. When I'm working with clients, it's usually the men that reach out to me but the women that will ultimately decide if the deal moves forward or stops. For this reason, I'm adamant about also having the wife on the phone for all discussions, since a lot of the time she is the most important stake holder. All that said, that's a trend I see amongst married couples. I do not see a lot of single females becoming investors on their own. 

@Angelo Mart - I'm sure that just because one female decided to not work with you does not mean you believe no females can be reached. 

@Holly Williams - are you kidding? Fake news is a term simple people use when they don't like transparency or don't want to explain themselves or are too lazy to actually debate. 

@George W. - But it is gender-based. I'm not saying that's anyone's fault (male or female) nor am I piling on men (I realize 2018/2019 have been difficult years), I'm just saying that females only make up 25% of investors, whereas they make 91% of household decisions. That's clearly a gender confidence gap. You don't need a physical barrier to limit you from entering the market- you need a psychological barrier, and clearly a lot more females don't see themselves as investors then men who don't see themselves as investors. Why though? 

No matter what "category" you're in, the large majority of other members of your category do not invest in real estate.

There are a host of studies conducted from a variety of angles that show that in general, women are more risk-averse than men. The area of life being considered doesn't make a difference, and by definition, risk-aversion means that a person won't take a perceived risk even if that person has the same knowledge, resources, and safety net as another person who takes the risk.

What should we take away from this?

Not as much as most people think. 

Many "sexism" allegations these days are apex fallacies - noting that men are "overrepresented" at the high extremes of society (while ignoring that they're also overrepresented at the low extremes). This is what we'd expect when one group is more risk-tolerant than the other. But it is also true, and most important, to remember that we're all individuals. You are not somehow more bound by what Person A is doing than by what Person B is doing if both people are a thousand miles away from you but Person A shares your gender and Person B does not.

Women are generally shorter than men, too. What does that matter to a woman who's 6 feet tall? Or to a man who's 5'4"?

When you've made millions of dollars in real estate and are retired, doing whatever you want, will it matter whether the other people who have done the same share your race or gender?

Originally posted by @Erin Spradlin :

@Angelo Mart - I'm sure that just because one female decided to not work with you does not mean you believe no females can be reached. 

@Holly Williams - are you kidding? Fake news is a term simple people use when they don't like transparency or don't want to explain themselves or are too lazy to actually debate. 

I'll elaborate now that I'm at my computer and not my phone. I can assure you that I'm not lazy, I love transparency, and after 35 years in market research and advertising, and 20 years of real estate investing, I can assure you that you can make data say whatever you want it to.  How often does Barrons write about alternative investing outside of the stock market? Who are the advertisers that pay the bills?  The article ONLY talks about Wall Street, and specifically mentions the fact that women question financial advisors more and are more likely to take their money elsewhere. It also says that women are more likely to engage in tax planning, long-term care, etc. That's actually SMART. The article doesn't talk about wealth...it talks about investing in the stock market with financial advisors, most of whom have no idea what the market is going to do beyond "over time the returns have been 10%...just hang in there."  The article looks at one metric..."how much do they invest in wall street products?"  Wall Street gets richer, we pay huge fees, stock investors pay more tax in general, and to make a blanket statement about how ignorant women are about financial matters is an ignorant statement in and of itself.

When you talk about investing, you have include all assets...not just stocks.  My parents drank the cool-aide, and I watched them have to withdraw their retirement funds when the market was down.  I watched what wealth they had disappear, and you can bet the farm that my portfolio would look to Barrons like I'm "risk averse."  

"Fake News" was probably not how I should have articulated things.  I should have said, and will now, that it's a one-sided article written by a very smart woman that has spent her career writing about wall street, published in a magazine that is owned by Dow Jones and is a sister publication to the Wall Street Journal.  It's a blanket statement that women are more risk-averse than men, less financially savvy, and lack confidence.  As women, we should question that. 

I believe that the US population as a whole is not as financially literate as we should be.  It has less to do with sex, and more to do with our educational system and the media we consume.

Hope that helps clarify, and thanks for getting this thread started. It's a very good topic to explore.

I too looked at the article and Holly's analysis is spot on...I think it's difficult to get at risk adversity by gender in real estate from the content. But as far as the buying of houses through agents goes, how many agents are really working closely with investor clients who buy more than one or two properties from them? And speaking from my own experience, what about investing couples?

I do the writing here on Bigger Pockets but my wife really is the brains of our little operation beyond things like what kind of drywall and brand of water heater to buy. And I'm fine with that, because repeated success is hard to argue with, but also because in mom and pop landlording, it's really the normal order of things. The pop does the work on the properties, the mom handles the money and makes the strategic decisions. Risk aversion and gender in REI just seems a lot more complicated than "the poor dearies need more confidence and they'll be fine," which is very much what the article concludes about women and general investing.

Updated 8 days ago

Risk aversity, not adversity. There's six years of college, right in the toilet.

Originally posted by @Dennis M. :

@Holly Williams

Yikes ...When did you have your husband neutered ?

Gotta start early in the game, lol.  I did however let the "put down the toilet seat" go by the wayside, and 19 years later one of my few regrets is that I didn't tackle that one at the same time!  :-)


 

Originally posted by @Holly Williams :
Originally posted by @Dennis M.:

@Holly Williams

Yikes ...When did you have your husband neutered

Gotta start early in the game, lol.  I did however let the "put down the toilet seat" go by the wayside, and 19 years later one of my few regrets is that I didn't tackle that one at the same time!  :-)

Well you must be doing something right . 19 years is a long time these days . Congrats on a successful marriage 

 

 

Originally posted by @Erin Spradlin :

@Angelo Mart - I'm sure that just because one female decided to not work with you does not mean you believe no females can be reached. 

@Holly Williams - are you kidding? Fake news is a term simple people use when they don't like transparency or don't want to explain themselves or are too lazy to actually debate. 

My god it was a joke! I had one female that was stubborn lol shoot me. I personally know females in this business that blew me out of the water with flipping and buy/hold. 

 

Originally posted by @Holly Williams :
Originally posted by @Erin Spradlin:

@Angelo Mart - I'm sure that just because one female decided to not work with you does not mean you believe no females can be reached. 

@Holly Williams - are you kidding? Fake news is a term simple people use when they don't like transparency or don't want to explain themselves or are too lazy to actually debate. 

I'll elaborate now that I'm at my computer and not my phone. I can assure you that I'm not lazy, I love transparency, and after 35 years in market research and advertising, and 20 years of real estate investing, I can assure you that you can make data say whatever you want it to.  How often does Barrons write about alternative investing outside of the stock market? Who are the advertisers that pay the bills?  The article ONLY talks about Wall Street, and specifically mentions the fact that women question financial advisors more and are more likely to take their money elsewhere. It also says that women are more likely to engage in tax planning, long-term care, etc. That's actually SMART. The article doesn't talk about wealth...it talks about investing in the stock market with financial advisors, most of whom have no idea what the market is going to do beyond "over time the returns have been 10%...just hang in there."  The article looks at one metric..."how much do they invest in wall street products?"  Wall Street gets richer, we pay huge fees, stock investors pay more tax in general, and to make a blanket statement about how ignorant women are about financial matters is an ignorant statement in and of itself.

When you talk about investing, you have include all assets...not just stocks.  My parents drank the cool-aide, and I watched them have to withdraw their retirement funds when the market was down.  I watched what wealth they had disappear, and you can bet the farm that my portfolio would look to Barrons like I'm "risk averse."  

"Fake News" was probably not how I should have articulated things.  I should have said, and will now, that it's a one-sided article written by a very smart woman that has spent her career writing about wall street, published in a magazine that is owned by Dow Jones and is a sister publication to the Wall Street Journal.  It's a blanket statement that women are more risk-averse than men, less financially savvy, and lack confidence.  As women, we should question that. 

I believe that the US population as a whole is not as financially literate as we should be.  It has less to do with sex, and more to do with our educational system and the media we consume.

Hope that helps clarify, and thanks for getting this thread started. It's a very good topic to explore.



 My god it was a joke! I had one female that was stubborn with me, lol, shoot me. I personally know females in this business that blew me out of the water with flipping and buy/hold deals. I also, respect any female in this game!!!

@Holly Williams Wall Street pumps out so many puff pieces to advertise its products it's unreal. Id be curious to see how data on women owned small businesses jives with the articles data on investing and risk as they define it. Personally I watched two successful men in my family lose quite a bit in the stock market. They made their money in real estate and later recovered back in real estate. As a single female real estate investor I do feel at times I am risk averse but not more so than most men and women I know. I think it boils down to experience. Confidence in the face of risk is gained through experience. As a total tangent Im concerned about how increasingly fewer males are attending or graduating college. Obviously university is expensive and no guarantee of employment or success. I just hate to see men miss out on the education itself. And its a new trend. I dont view it as anything innate to the state of being a man. The causes of such gendered patterns however are multi-layered and hard to pin down. Defining risk-taking is especially tricky. Basically, I got nothing. Ha ha. Interesting topic though.

Interesting thread. 

When it comes to real estate, natural selection does tend to favor men, but not because we're "smarter" - if anything, it's because we are dumber. There have been plenty of studies that have demonstrated:

1. Men are more likely than women to engage in risky behavior.

2. Men are more likely than women to overestimate their abilities.

3. Men are more likely than women to be confident despite information to the contrary than women.

When it comes to real estate, time tends to absorb a lot of mistakes - or, as the old saying goes, "fortune favors the bold." Thus, one can buy a house that is not a very good deal, screw up the rehab, and still make money assuming the property is held long enough. This is not true with many other investments. In general, with real estate, taking action is going to make you wealthier than not taking action. Thus, if one could do such a study, it would likely find that the vast majority of real estate "failures" were by men, as a ratio of investing, whereas more real estate "successes" were by women, as a ratio of investing - but in all cases, men would outnumber women significantly in sheer numbers just because of 1-3 above.

Women are generally much better managers, including managing money, than men because of 1-3 above. Without women, most men would probably be broke while a few would be spectacularly rich, for the same reasons. There are also societal issues - historically, women had to be more concerned with reserving assets for the future in case the male died and she was left raising children on her own - and discrimination issues, wherein a lot of people assume the woman is in a secondary role (I see this in my own office with how some men interact with my female employees) - and early childhood issues - how many women are taught to "take risks" at an early age? - but a lot of it is just pure dumb luck based on nature. 

All of this is generalizations that hold true in many but not all cases. Obviously some women are fantastic real estate investors while others go bankrupt. Given an equal amount of information, however, most men would fail while a few would be super successful, and many would take action, wherein most women would be reasonably successful, a few would fail, and less would be inclined to take action. 

@James Free - I think you have articulated the issue in a way that a lot of people want to, but maybe unsuccessfully struggle to express. Your point being that people are different (the height issue) and also that individualism exists. I completely agree. I think there is some baked in gender bias that favors men, which gets some people riled up and defensive, but that actually wasn't the point to my post. My point was that there are differences to how men v. women approach investing, and we should discuss it more and try to speak to those differences rather than avoid them. While I believe there has been some favoritism, I'm not overly interested in focusing on that or attacking anyone on it, I just think why do men tend to invest more? What is that about? How should we look at that and bring females more into this world? Anyway, I appreciate your thoughts and eloquence. 

@Holly Williams - Thanks for explaining your position more. I am in 100% agreement that when reading articles, we need to question the source, their bias and what may be missing from the piece. 

Additionally, I agree that our financial literacy is lacking and it's a public education issue that should start at a very young age. I feel it is strongly to the detriment of our society, and more importantly to the individual, that people don't get more of this. 

That said, while I concede that financial literacy in the US is not good across both genders, I don't concede that it explains everything, because it does not explain why females only make up 25% of the investing pool. If all things were equal, they would make up 50% of the investing pool- poor financial literacy or not. 

@JD Martin

1. Men are more likely than women to engage in risky behavior.

2. Men are more likely than women to overestimate their abilities.

3. Men are more likely than women to be confident despite information to the contrary than women.

When it comes to real estate, time tends to absorb a lot of mistakes - or, as the old saying goes, "fortune favors the bold." Thus, one can buy a house that is not a very good deal, screw up the rehab, and still make money assuming the property is held long enough.

Exactly. Well said. 

We can attack any study's methods, but I'm siding with studies and surveys over anecdotes any day. "All my friends are Democrats" does not mean all of the country is. Likewise, "I know tons of female investors" does not mean that holds across the country.

Again, back to some data ... 

Here's an interesting survey conducted by Harris Polling in 2017. (Flip to pages 19, 20, and 21 for some interesting points.) Two interesting points that seem to back up @Erin Spradlin's point (also my business partner and wife.)

  1. Men and women were about equal when asked if they were interested in real estate investing.
  2. But men were nearly twice as likely to say "yes" when asked if they were currently investing in real estate.
  3. 19% men to 11% woman
  4. The gap was even wider in the 18-34 cohort and 35-44 cohort (28% and 25%, respectively vs 11% and 13% for women of those age groups.)

    I would be interested in seeing any kind of data from someone who thinks this dynamic is hogwash. (For instance, you could cite this study from Lending Tree showing that single woman own 22% of homes, while single men own 13%. It's not exactly what we're discussing here, but it's at least data getting near the point.)

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