By Craig Erwin, Ph.D.
Some of the most fascinating ways in which men and women differ involve how they invest. According to The Vanguard Group, men tend to be overconfident. This often leads them to take too many risks and trade too much, which usually hurts their returns. Not women. Fidelity Investments found that women tend to outperform men as investors. But Fidelity also found that women tend to lack confidence; only 42% have faith that they can reach their financial goals. Women tend to hold too much cash, in part because they lack confidence in their investing ability. This hurts their returns, in part because the interest earned on cash in a savings account often pales in comparison to the returns on stocks, bonds, and real estate.
Most women would benefit from taking more risk while most men would benefit from taking less risk. Women would benefit from investing more of their cash. Men would benefit from investing more like women; taking reasonable risks and investing in time-tested assets like stock and bond index mutual funds, not cryptocurrencies, hedge funds, startups, and the like.
Are your blind spots costing you money. Perhaps you are sitting on too much cash or speculating on high-risk investments. Benjamin Graham, Warren Buffett’s idol once wrote “The investor’s chief problem – and even his worst enemy – is likely to be himself.” Don’t let your tendency to take too much risk, or your fear of taking any risk, keep you from reaching your financial goals.
Do you recognize your investing blind spots? Are they keeping you from reaching your goals? Do you know how to compensate for your weaknesses?
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