Women Are Under-Confident About Investing. And That’s Good!

By Monika Halan
Mint, New Delhi.

I’m not a celebrate-the-day kind of person.

The Valentine’s Day circus irritates me, as do the other commercially driven days to celebrate a relationship.

You need a “day” to remember your mum? But I’ll make an exception and mark 8 March as Women’s Day and turn all the attention generated into having this conversation.

I want to talk about the difficult relationship that women have with money.

It begins with a stereotypical classification of genders according to the ease with which they handle numbers.

Girls are not good at math and boys are. If you hear this often enough as you grow up, is it any surprise that you begin to believe that it is true? And that is the first brick in the wall between women and their ability to deal with money.

As children we’ve all listened to the adult chatter around us. If we knew how much that is going to condition us later, we’d have shut our ears and not let the stereotypes get perpetuated in our sub-conscious.

Some of the wisecracks we can all remember are about women spending the money that men earn, about women having no control over spending.

In real life, splurge spending is not gender-specific. Only the kind of stuff men and women buy differs. Men go in for gadgets, cars and other gizmos that usually make up for big, one-time spending. Women may spend the same amount, but it gets spread out over accessories — shoes, jewellery, handbags.

Growing up in a patriarchal society, in which mostly men go to work and women are homemakers, boys and girls get conditioned to seeing the men earning and taking all the money decisions.

The women manage budgets and manage to save pin money. But the big financial decisions like buying a house, or planning for future goals are left to the men.

One generation later, the woman goes to work as well, but the sub-conscious money attitude prevails. Money management is handed over to the husband, while she manages the monthly budget.

Other than a lack of control over her own financial life, this is disastrous in situations where the marriage ends. The woman finds that while she spent her salary on household budget, the man used his money to build assets — in his name.

She’s left with the drycleaning bills and he with the car and house. Australia’s Financial Literacy Foundation’s report titled “Financial Literacy–Women Understanding Money” corroborates this.

A 2008 survey found that women are highly confident in their ability to budget and save, and a majority say they have good saving habits. However, fewer women are confident in their ability to invest, they are less confident in their ability to plan for the long-term financial future and retirement.

So we have the building blocks to a better relationship between women and money. It isn’t that they don’t have a head for money; it is just that they find it difficult to turn savings into investments.

The leap between the money sitting in a savings deposit and going to work in an investment product is the most difficult to take.

But women should take heart from a much cited behavioural finance paper titled “Boys will be boys — gender, overconfidence, and common stock investment” by Brad M. Barber and Terrance Odean.

The research study ( ) found that single women investors outperformed single men by 2.3 percentage points, women investment groups outperformed similar groups of men investors by 4.6 percentage points.

Women on average outperformed men by 1.4 percentage points. The key reason for men underperforming women? Overconfidence! This overconfidence encourages them to trade more. But trading more has costs and they end up adding to the broker’s income rather than their own returns. Women do more research, ask more questions and then stick with their decisions.

So, dear ladies, the underconfidence about investing that most of you experience is actually your greatest strength.

Because you don’t know enough and don’t have a giant ego that prevents you from asking what may look like “stupid” questions, you actually end up doing better at stock market investing.

Between this year’s 8 March and next year’s, let’s work on moving from saving well to investing well. You’re better at it than men after all!

Monika Halan works in the area of financial literacy and financial intermediation policy and is a certified financial planner. She is editor, Mint Money, Yale World Fellow 2011 and on the board of FPSB India.

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