Men may be from Mars and women from Venus, but when it comes to deciding who should manage the money in your household here on planet Earth, women may have the edge.
If a new study of alternative investment managers is any indication, women may actually be better investors than men. The study, conducted by consulting firm Rothstein Kass, found that hedge funds led by women, who are the minority in the hedge fund industry, far outperformed the global hedge fund index in 2012. A spokesperson for the study said the results came as no surprise, as research has shown women investors overall are more risk-averse than men, making them potentially "better able to escape market downturns and volatility."
The study suggests that female hedge fund managers may be better at managing risk and less likely to try to time the market. While these tendencies didn't protect them from downturns, it gave them the benefit of rallies.
Last year, the American Institute of CPAs (AICPA) released research that showed financial matters are the most common source of discord among American couples, prompting an average of three arguments per month. These types of arguments can include disagreements about what and when to buy, sell or hold; and in what type of investments -- basically, about the balance between risk and return. The study highlights that the majority of women may hold a mindset which may be best for a portfolio's long-term performance; however, certain qualities can also make some women appear indecisive and excessively careful, which can spark arguments with a spouse that may not hold the same views.
Unfortunately, aversion to risk is generally seen as a negative when it comes to investing. Too much caution can be equated with lost opportunity cost or the danger that insufficient risk could inhibit a portfolio's potential for growth. While a valid point, risk aversion -- when applied by men or women at appropriate levels -- may produce better returns.
In her recent book, Warren Buffett Invests Like a Girl -- And Why You Should, Too, author LouAnn Lofton agrees. She asserts that behavioral economics have shown that women in general are indeed more risk averse - and that this is a good thing. Women "trade less and their investments perform better, that they are more realistic, that they are more consistent investors, and that they tend to engage in more thorough research and ignore peer pressure," according to Lofton.
March marks Women's History Month, which is a good time to reflect on just how much progress women have made when it comes to finances. Historically, women are still fairly new to the world of investing -- both as professionals, like the hedge fund managers in this study, and as consumers who manage their own investments. Though many women have always managed household finances or held professional positions in finance, others are just gaining experience in investing and may lack self-assurance in managing finances. For both groups, these new research findings should provide a confidence boost.