First, a word about girls. (Stop making that face.)
When the ladies in your life grow up, they may face certain challenges that, historically speaking, you guys haven’t had to deal with. If they’re not careful, things like pay disparity, time out of the workforce to raise kids, and a lack of confidence in their investing abilities can hinder their financial security throughout life.
Guess what, guys? You’re not off the hook. You, too, have to deal with some gender-related stuff that can affect your financial success, especially when it comes to investing.
Everyone brings emotional baggage to money management.
Some of the advice for little girls about how to overcome obstacles in their path can be helpful to you, too. But in other ways your issues are different, whether it’s due to biological traits (e.g., testosterone levels) or cultural influences (how society expects a man to think and act).
On the plus side, male investors are typically less fearful of risk than females who tend to invest their money more conservatively — sometimes too conservatively for their own good. And, as a recent Charles Schwab survey found, young men ages 16 to 25 are on average putting aside more money in savings than young women ($2,000 versus $1,267). Way to go, guys!
That said, there are definitely things you can do to be your best male self when it comes to your finances.
Acknowledge your emotions
Money management isn’t just about math. How you feel has a huge influence on how you handle your finances.
Both boys and girls bring emotional baggage to money management: For women, it’s often lack of confidence and fear of making mistakes that hampers their financial decisions. For male investors, it’s the desire for excitement — to not miss out on any of the action, or feeling like they should be reacting to what’s happening — that gets them in trouble.
When you start investing, how you react to the roller coaster of stock market ups and downs will be particularly important.
Warren Buffett — he’s like a superhero to investors — has said that it’s not IQ that makes a great investor; it’s the ability to control the emotions and urges that get other people into trouble.
Be confident, but not cocky
There’s a difference between being smart and being a know-it-all: Someone who’s smart recognizes that there’s always more they can learn; the know-it-all assumes, well, that they already know it all.
A Prudential study several years ago highlighted the ways in which the sexes differ in their perceptions of their own abilities:
Women Men Knowledge of financial products Very knowledgeable 5% 14% Somewhat knowledgeable 49% 57% Not very knowledgeable 32% 22% Not at all knowledgeable 13% 8% Confidence in financial decision making Very well prepared 22% 37% Need help or need to catch up in many areas 63% 57% Are self-described “beginners” 15% 7% Risk tolerance Willing to go take a risk for the opportunity of a greater financial reward 49% 70% Enjoy “the sport of investing” 22% 40%
Source: Prudential Financial Inc. “Financial Experience & Behaviors Among Women”
As you can see, guys rated their knowledge and abilities much higher than women. But confidence, in itself, is not the problem. Overconfidence is.
Many studies show how overconfidence can lead to one of the most destructive behaviors an investor can engage in: Over-trading. Which leads us to …
Keep your inner daredevil in check
As we said earlier: A little risk is a good thing. Too much risk taking isn’t.
We don’t blame you for thinking that investing in the stock market is just another sport. On the surface it shares a lot of the same traits. It begins each weekday morning with a starting bell, and then it’s off to the races, with frenzied traders swapping shares all day, until the closing buzzer.
Understand that the hyperactive stock jocks you see on the business channels and in movies aren’t simply in it for the thrill: They’re trying to eke out a higher score (better investment returns) than investors who simply buy a stock or an index mutual fund (a bunch of stocks in a single package) and hold on to it for years.
But you know the fable about the tortoise and the hare? It turns out slow and steady wins the race for making money, too.
Investors who trade frequently do themselves and their portfolio returns a disservice by racking up transaction fees and tax bills, and dumping investments too soon and waiting too long to get back in the market.
One recent study tracked how male and female investors managed their portfolios over a 12-month period ending in early 2015. It found that men traded 50% more frequently than women. Yet female investors (the tortoise traders, if you will) absolutely crushed the opposing team. At the end of the year they had made a whopping 12% more.
Yes, it’s hard to resist the fast-paced “game” of active stock trading. But remember, when you’re managing your own investments in the future, it’s stamina, not speed, that wins every time.
Seek opinions from people who aren’t like you
Temperance and appropriate amounts of confidence are two reasons women tend to outperform their male counterparts in investing. But there are other reasons you want them — and other people who don’t look, think or act exactly like you — on your team: They bring a unique perspective to the table.
Whether you’re talking about your English homework or a potential investment, seeking diverse points of view on a topic (especially when you’re learning how to invest) makes you smarter. It helps you see things in different ways and reveals blind spots you might not realize you have.
Harness the collective brainpower of all of the people around you. Get used to talking about money openly instead of treating it like a taboo topic as generations before you did. This will equip you well as you head into adulthood and face the challenges of credit cards, student loan debt, workplace retirement savings plans and — eventually — teaching your little boys and girls about money.