[Attention Men] Could Your Gender Cost You 1% per Year?

Steve McDonald By Steve McDonald, Bond Strategist, The Oxford Club

Slap In The Face Award

Transcript:

Here’s a slap for all the male investors out there, compliments of the Wharton School of the University of Pennsylvania.

Testosterone is now the enemy of successful investing. At least, that’s what a recent study by the Wharton School and a few others concluded.

This was a follow-up to a 2001 study that reported that women return nearly 1% per year more than men do.

And at the heart of the 1% edge women have over men is the “hurry up drug,” testosterone, which increases confidence, snap judgments and more trading.

According to Wharton, overconfidence leads to more trading, higher costs and, ultimately, lower returns.

And that 1% difference adds up to 23% over a 30-year period.

These aren’t pennies we’re talking about!

I’m not surprised by these findings.


When I was managing money back in the ‘90s, almost all of my clients were women. I have known for years that they were better investors. There are a lot fewer of them, which is a real problem, but that’s for another time.

But my experience taught me that women are more intuitive and easier to work with. I didn’t receive any calls from them directing me to buy junk they heard about from their buddies on the golf course.

They weren’t perfect. They made mistakes, too – usually on the side of being too conservative.

If women in general have one investing flaw, it is being too safe with their money.

But the numbers don’t lie. They are beating men by 1% annually.

So maybe safe is the answer.

The Wharton School’s recommendation is to get yourself out of the short-term trading mode and hold your investments longer.

I was really glad to hear that.

I couldn’t imagine how we were going to reduce our testosterone levels. Most of the guys I know are trying to raise them.

I wonder if anyone has done a study about what reducing or increasing estrogen levels might do.

So watch it guys… We’re too confident and have too much testosterone.

Good investing,

Steve