By nature or nurture, are women worse investors?

A new report from NAB claiming women invest poorly gets a cool reception.

Giselle Roux, chief investment officer at Escala Partners.

A new report from NAB claiming women investors are likely to lose large amounts of money because they are too conservative has backfired with a range of high-level critics — men and women — questioning a range of controversial findings.

“Australian women are missing out on tens of thousands of dollars in savings during their lifetime because of their tendency to shy away from taking appropriate levels of risk in their portfolio,” NAB says.

“We believe this is the first major study in Australia to demonstrate that women’s lower super balances are not only impacted by career breaks and lower pay, but also investment preferences,’’ the report’s author, Kajanga Kulatunga, says.

As part of NAB’s research, Kulatunga looked at whether anatomical differences in the male and female brain influenced investment decisions.

“Our research shows there are three regions of the brain that are anatomically different in men and women, which may have a major impact in financial decision-making,’’ he said.

Not so, says one of Australia’s most prominent female investment analysts, Giselle Roux, chief investment officer at Escala Partners. “I don’t think there are any biological differences between men and women; it must be behavioural,” she argues.

“I don’t think people are born to invest differently because they are male or female. Society’s expectations mean people are treated differently.”

Like Roux, Steve Macdonald, head of investment at Evermore Money Management, sees the differences as more behavioural than biological. “I think women are conditioned to think that their role is to be stewards and nurturers. Whether that accounts for all of the difference, perhaps not. Some of it may be biological, but that’s out of my pay grade.”

Macdonald, who co-founded investment advisory Infinitas Asset Management, released a white paper last year detailing why women’s conservatism can help generate better returns.

Meanwhile, Trish Power of www.superguide.com.au, who has penned books on superannuation and investing, believes we need to look to the past to gain a better understanding of women’s conservatism.

“Historically, women haven’t been the ones to invest,” she says. “Men earned and invested the money, so it’s a fairly recent trend that women are investing.”

Perhaps women are more cautious when investing — yes, that’s a very broad generalisation — but is conservatism really such a bad thing?

Improved returns

Contrary to NAB’s findings, numerous studies have shown the more conservative approach often favoured by women delivers higher returns over the long term. “Research shows women are doing the right thing by being more conservative and favouring defensive assets and men should follow them,” Macdonald says.

Women tend to be more dispassionate than men when investing and trade less, reducing the risk of losses. Studies also show that while men tend to invest with the goal of achieving capital growth, women generally focus more on the income an asset will produce.

For Roux, even the idea that men and women invest differently doesn’t sit well.

“When it comes down to whether women have a different investment style to men, the answer should be absolutely not,” she says. “Investment markets are investment markets — they don’t have a gender bias.”

Despite not being comfortable with the notion, Roux concedes there are differences that arise when men and women invest.

“Whether we like it or not — and this is a very broad generalisation — women have generally not exposed themselves as much to investment market decisions as their male counterparts,” Roux says.

“Women perhaps treat investing in a slightly different manner. They’re probably a little more patient; they tend to not want to brag as much about their latest winner. I’m not saying all men do that but to be honest men seem to have more of a desire to point to the big wins in their portfolio.”

Whether men’s and women’s investing preferences come down to nature or nurture, one key takeaway from the study is that both men and women would do well to try to emulate the opposite sex when it comes to investing. “Women need to be on guard about not becoming too cautious and fall victim to inertia, while men need to be on guard that they aren’t overconfident about investing, that they don’t trade too frequently and that they don’t take excessive risk,” Macdonald says. “If they each became more like each other a blend of the two would work well.”

Another takeaway is that planners have some work to do when it comes to dealing with women.

“What’s happened in the past with the financial planning industry is they’ve told people what to do, rather than taking them on a journey. I don’t think women respond well to that.”

Roux says the focus should be on giving women an environment in which they can talk about investment markets in a collegiate manner, “where they don’t feel there’s some man who’s going to look at them and say ‘oh what a stupid question’.”