Want to Be a Better Investor? Ask Your Wife!

Picture of coins on the stock sheet of an investor.

Last week, we had a trio of male-female dynamic articles about employment after the Great Recession, households with female breadwinners, and the effect of changing industry dynamics on the male-female balance in the workforce.  We aren’t done with breaking down the male-female wall quite yet, however!

We were inspired to post again by our friend Kathleen’s articles at The College Investor and at her homebase Frugal Portland.  The common theme of those articles?  Her fear of investing.

Kathleen isn’t alone – it turns out that, compared to men, women often under-rank themselves in their investing ability.  Men, on the other hand…

The Difference in Male and Female Investors

That (hyphenated) word I used – ‘under-rank‘ – was it fair to use?

Of course, that word implies that there is basic parity between the sexes with investment knowledge (or men know more about investing and still over-rank themselves).  So yes, it’s a loaded word, but I doubt that the disparity in degree choices completely accounts for the differences observed between the sexes in the survey.  That means you’re left with two explanations – men are informally learning more about investing (books?  TV?), or there is a fundamental difference between the sexes which makes men overconfident.

I’m going with the latter theory.

Shockingly(!), men have 10 – 20 times more testosterone than women, which factors in a lot of areas – but for the purposes of this piece, note that testosterone has a huge effect on risk tolerance (on that particular study, hat-tip goes to this guy).  Testosterone’s effects are well known – its effects show up everywhere from decreased life expectancy for males, to differing career choice, to increased musculature (note that the effects of steroids on female athletes are much more pronounced).

Of course, that also applies to investing.  The USA Today report showed 40% of men solely control or take the lead on finances, compared to just 29% of women (the rest of responses claim neutrality – no word on who hits the ‘trade’ button!).

So, the survey (plus a few other stats plus biology) tells us:

  1. The majority of money in the market is controlled by men
  2. Men take more risks.

The Practical Implications

One potentially surprising result we already linked in an article?  Female hedge fund managers outperform male hedge fund managers.  Right; there are potential forms of bias here (“men run more funds with bigger balances, limiting choices” comes to mind… or “the profession is biased so women that make it are necessarily better performers”).  However, it’s much harder to come up with reasons why this second result – that female investors outperform males in general – is biased.

What causes it?  Is it a self-limiting effect, where if more females invested (and ‘became’ the market, so to speak) the effect would disappear?  Do males take the reins in households where both wives and husbands have equal experience and knowledge… dragging down the average?

The point isn’t that females will always outperform males… no.  Just like the statement “males are on average 3 inches taller than females” doesn’t mean every male is taller than every female, a member of either gender’s advantage in experience, knowledge or innate skill might make them a better investor.

All we can say?  On average, females who invest beat males who invest… full stop.

The Key Takeaway

Does that mean that either males or females should toss over control because of the results of one study?  Well, no, of course not – like I said, you need to fairly evaluate your own skill and experience level and beware of the overconfidence that makes you do silly things.

What I’m saying is that if you’re new to investing and you harbor any doubts (and you’re a married male) – don’t drown the thoughts.  Ask your wife what she thinks.

And if you don’t know if you’re still a beginner?  Ask your wife about that too.

Who runs the investments in your household?  If you’re married or in a long term relationship, do you both buy-in before major investment moves?  Purchasing decisions?


  1. says

    Thanks for the hat tip! There was another study which focused on the math skills of the husband vs. wife, particularly where the husband ran the investments in the household but the wife was better at math, and, unsurprisingly, they didn’t do as well as the households where the numerate spouse was in charge of playing Jim Cramer: http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2012/09/28/can-basic-math-skills-make-you-rich

    When we used to do individual investments (a time in the distant past), I’d make the exotic trades like bull put credit spreads, and she’d stick to basic, fundamentally sound stocks. Her performance smoked mine.

    • says

      Haha. I’m more of the mind to understand the exotic trades and use them as indicators (Google search “site:dqydj.net Predict S&P”) more than to actually trade them. I feel stocks are plenty complicated – if it was a 10 year process to become confident enough to hit the trade button, it’d be years before I was confident enough that I fully appreciated anything more complex.

  2. says

    PK, if you don’t mind me asking… Are you married?

    The dynamic for us is generally that Mr PoP dreams up and explores investment opportunities, and then I run the numbers and we both need to come to a decision as to whether the risk/reward ratio is appropriate for us at that time.

    He pushes us to take more risks, and I pull back seeking safer options. We end up with a balance in the middle that works for us. =)

    • says

      I don’t mind answering – I am.

      My wife decided (actually, we were still engaged at the time) to trust me on the securities side. She tries to stay involved – but she more likes that I audit the results myself (I keep dollar values in for her to view, of course) and that everything is tied into Mint.

      She’s an interior designer and property manager, so her expertise falls squarely on the Real Estate side. Real Estate investments are a shared venture.

      To speak to your debt ratio from the other day – we’re more leveraged, haha. However, we think the Bay Area is getting frothy, so we’ll probably back off a bit.

  3. The College Investor says

    In our house, I handle the investments and my wife handles the day to day money. I know that I can be prone to taking more risks, so I like to continually share what’s going on to ask my wife what she thinks. It can help. Plus, not being emotional can help as well.

    • says

      For us, I take the lead on the investments, and we mostly share responsibility on the others – but my wife still relies on me to do most of the books. Our strategy is to throw everything into Mint to get any mistakes out there immediately, heh.

  4. freeby50 says

    I would expect that more risk taking and inflated egos among men would lead to more hasty decisions or even recklessness and therefore more mistakes. If women have lower risk tolerance and a realistic view of their investing skills then that would result in more careful analysis and better results.

    My wife and I have a mix of shared investment activity and separate investments. We each manage our IRAs/ 401ks individually. I’m not sure who does better as far as returns honestly, we don’t really actively compare. I think we both do ‘OK’ overall. But thats not much of our assets. Most of our assets are in real estate (which is illiquid and we share handling that), cash and a company managed retirement account.

    • says

      I outperform my wife in investing… but only because her return is 0%!

      It’s funny you mention egos and risk taking. Consider this – I’m egotistical enough to think people might want to read what I have to write… I started a blog! I’ve probably got to take my own advice pretty carefully, haha.

  5. krantcents says

    I handle our investments, but I discuss many of them with my wife. I want her involved because I may not always handle the investments in the future. I have seen the widows of some of my friends totally clueless with their investments. It is not enough to take care of your spouse financially without including investing.

    • says

      What’s your impression of the younger generation, at least as it comes to financial knowledge? An article some time back talked about how your ‘fiscal knowledge’ peak came in your late 40s or so… but how would you rank the average, say, 25 year old versus a 25 year old of the past?

  6. Pauline says

    I make my decisions, and pride myself in having my own money and going half way in all expenses. We aren’t married but own a house and 90 acres of land together, that’s it, all the rest we can do what we please with our respective money. I would hate that a man invests (and risks losing) the fruit of our hard work without consulting me! While things can go wrong, at least we would make the mistake together.

    • says

      “I would hate that a man invests the fruit of our hard work without consulting me!” – Haha, nice.

      My wife insists I run the investments… so I hope I’m not setting myself up for an epic blowup. I do audit the books once a year, but luckily for me my other investments outperformed the individual stocks (heh). Still got some labor fruits here!

  7. wealthinformatics says

    Men and women have their unique strengths. In a typical fashion my husband is a more risk taker but I handle it much more rationally. I do handle all our investment decisions but we discuss it before I do anything. It has been great to discuss because we see things from two totally different view points. He also has a “play” fund that he can use to pretty much buy anything he wants. In our mind it is his hobby money, retirement, I handle it.

    • says

      I’ve seen some arguments for ‘play’ funds – money where you don’t really care if you lose it all, so you might as well be uber-speculative. Do you find it to be a useful concept? What’s the ideal portfolio percentage? 5%?