By Craig Erwin, Ph.D.
Overconfidence plagues us, but it especially afflicts men. We think we’re smarter than we are, that we can outperform others at pretty much anything, and we are willing to bet money on it. When investing, we expect the market to rise more than is likely and we expect our investments to perform better than everyone else’s. Do we learn lessons after getting burned? Not likely. We can get burned over and over again and still remain overconfident, willing to take more stupid risks.
If men were smart, they would realize that it is pretty unlikely that their investments will outperform the market. Women know that they are unlikely to outperform the market, so they buy index funds like an S&P 500 index fund. And guess what? Women outperform men. Why? Men don’t buy index funds; instead they choose individual stocks, which tend to underperform the market.
Do you buy individual stocks or stock index funds? Are you happy with your investment portfolio’s performance? Are you confident that the performance of your investments will enable you to retire comfortably?
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