06 May 2014

Who Is More Risk Averse, Men or Women?

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Over the last few years there have been more and more articles surrounding the topic of Women & Investing, and the role women play in financial decisions. When it comes to Men, Women & Investing, there are a lot of gender-related behavioral differences to discuss.  In our most recent Quarterly Newsletter, we featured a piece titled “What Does Diversification Look Like for Me?” This topic was meant to create conversation, as a household, about what risk level is appropriate for you. However, what might be appropriate for you could be different for your spouse- and how do you find a middle ground as a couple?

A recent BlackRock Investor Pulse survey of 4,000 Americans found that women are generally more risk averse than men when it comes to saving and investing. We have known for many years that there are structural differences in men & women’s brains; however, we may not have known that these differences can lead us to perceive risks in life differently. Researchers have found that attitudes towards recreational & social activities and the risks they hold differ between genders. Some of these activities include neglecting to wear a seat belt, smoking, alcohol use and illicit drug use, criminal activities, and finally decisions about portfolios.

While this risk aversion for women can help them to avoid unnecessary losses while gambling on short-term decisions, there is also a risk of “missing out”. Women who concentrate their investments in lower-risk assets are taking on an unknown risk themselves, the risk of falling short of their retirement & other long-term financial goals. In our Quarterly Newsletter you will find an illustration on the balance between risk tolerance, risk capacity & risk required. While women may be more risk averse, they may need to take on more risk to have a higher likelihood of reaching their financial goals in retirement.

This is an ongoing process & you should look at your current risk level on a yearly basis. Then ask the question, am I on track for a successful retirement? If you are not sure you are taking the appropriate risk, contact us today to take a free Risk Tolerance Questionnaire.

Have a great day,

The All Star Team

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