New Neuroscience Study Says Women Make Better Investors

Neuroscience Says Women Make Better Investors, But Why?

"Women are better wired than men to avoid emotionally driven investing mistakes." Women's more highly developed emotional processing capabilities make it possible says the latest from neuroscience research. Neuroscience Tells Us So While our general tendency of "risk-aversion" continues to leave too many women at impasse regarding investing, those who have taken the plunge seem to actually have an advantage over men according to the findings of Richard L. Peterson, psychiatrist and author of Inside the Investor's Brain (Wiley Trading, 2007) and co-author of MarketPsych: How to Manage Fear and Build Your Investor Identity (Wiley Finance, 2010).  Peterson points to women's higher levels of oxytocin and a thicker corpus callosum (fibers connecting the two halves of the brain) as likely reasons for the differential between the sexes and the basis for his survey results showing women as:

1) More self aware and more likely to listen to their feelings
2) More aware of the impulses driven by greed and fear and better able to filter them out

In a world where we’re more likely to hear about women’s failure to act due to their risk-averse natures, these findings correlate with what I’ve seen in my practice: Women - who make it past the initial barriers - tend to be more self-possessed and intuitive investors.  They don't jump around and chase 'hot tips' as much; they don't trade as frequently and ultimately they have better natural intuition.

The Sweet Spot: Balancing Risk-Aversion with Confidence

Recent study findings also demonstrate that men may be more likely to suffer investment losses due to their "over-confidence" along with the likelihood to overreact to short-term financial news that constitutes nothing more than "noise".  While these are merely generalizations about our gender differences, there is something to be gleaned ... and, dare I say, exploited. 

What we can deduce: Veer too far into over-confidence, and we're likely to pay the price; Veer too far into under-confidence (risk-aversion), and a similiar fate may await (the high cost to women of doing nothing).  

Finding the sweet spot, as usual, seems to be the best course of action. Maybe Ben Franklin had it right when he advised: "Do everything in moderation, including moderation."

 What is your experience?  Have you given yourself permission to follow through and listen to your instincts?  If you really want to gauge your instincts, write it down today and look back six months from now to see how you did.  Then let us know!
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