Douglas Obey, Author, Money and the Human Condition
Living through the 1060’s and 1070’s would have convinced you that there were no difference between the sexes, but I think we have evolved since then. And while there are no absolutes between men in women in business or regarding finances there are plenty of generalities we can take a look at and how the genders differ in their views and perception of money, investments and business.
I’ve been a financial planner and investment advisor for over 30 years and it’s been my experience to note that women are typically more financially conservative than men. Men tend to be willing to accept more risk than women. This difference can be problematic for both, with men being seen as too reckless and women too cautious. So my first exploratory question here is why might this be the case?
Can the reason be found when we revert to yesteryear when women were dependent on men—the time in history when men handled all finances in the household as well as business matters, and there were few if any women in the workplace let alone corporate finance? Perhaps it’s a natural consequence from centuries of specific social behavior and acceptance. Why men and women respond differently with regard to money and finances might be interesting to ponder, but what is important is how this difference manifests itself and what each sex stands to learn from the other in the disclosure.
Let’s begin with men. Not only are men typically willing to take on more risk than women, but they also have a tendency for less due diligence prior to investing, perhaps because they feel if the investment is lost they could always sleep in a tent and start over—or maybe it’s for the same reason men don’t ask directions. Who knows? But it is best to understand as fully as possible the investments you’re making before parting with your hard-earned money.
Women, on the other hand, tend to take more time to understand what they are investing in. However, they too often let fear or lack of complete understanding prevent them from taking an otherwise acceptable level of risk needed to acquire an investment with a potentially higher return.
This difference between men and women is magnified in small businesses and could be part of the reason why many fail during the first year. So in an effort to clarify an understanding between the sexes as it relates to money, let me spend a little time on this topic.
When starting a business or new venture, it’s important to do your homework. Both a business plan and extensive research are essential with start-ups in order to overcome the odds of failing. However, once a man understands the concept of the business or venture, he’s more likely than a woman to invest his time and money without understanding every detail. The down side here is that missing a crucial detail can derail a new business early on. On the other hand, if a woman, in her typically more cautious approach, gets lost in all the details and the myriad of potential problems a new business can face, the trigger might never be pulled, resulting in an opportunity lost.
A study conducted by Terry Odean, a University of California professor, found that women outperformed men when investing in stocks by 1.4% to 4.6% (depending on the particular study). Odean concluded the reason for this difference in success is related to “overconfidence in men when pushing forward in their decision-making.” This coincides with my conclusion that men in general are willing to take greater risk than women without the prerequisite amount of due diligence.
To summarize, women should be careful not to overdo the analysis as this can lead to paralysis and men, on the other hand, should engage in a little more homework before finalizing the investment or business transaction.
Remember, regardless of what the PC crowd insists, men and women come to the decision-making table with inherent differences. Recognizing this will not only make you a better investor but also more successful in relationships, both business and personal.
[Image courtesy of Ambro at FreeDigitalPhotos.net]
About the Author
Doug Obey has over 30 years experience helping people as a financial planner and investment advisor and is the author of Money and the Human Condition. Obey is also a self-made, successful entrepreneur and business owner who has acted as CFO and advisor to many other business owners. Learn more about Obey at http://www.dougobey.com/