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Friday, 18 May, 2001, 19:30 GMT 20:30 UK
Are women better investors than men?
Graph showing the gender split amongst people buying a variety of financial products

By BBC News Online's Briony Hale

Women are more reluctant than men to follow higher risk investment strategies such as buying stocks and shares, according to new research.

But research suggests that when women do take the plunge they tend to outperform their male counterparts, making more rational decisions and getting better returns on their money.

The lower number of women investing in these financial products is due to a more cautious attitude, confusion about the terminology, male-orientated advertising, and a male dominated industry.

But the tide could be about to change, with women now beginning to abandon their inhibitions in financial matters.

Women lag behind

Statistics show that 6% of women have not taken out any form of financial product compared to 4% of men.

Men are more likely than women to have ISAs, credit cards, mortgages, shares, unit trusts and life insurance, according to a report into the personal finance gender gap carried out by the Financial Services Authority (FSA).

Author of Sex and the City: Kate Fox
Kate Fox analysed gender differences in risk-taking
The only area where women hold more financial products than men is in savings accounts - the safest form of investment - and store cards.

But analysts agree that, while this gap still exists, it is quickly closing up.

The Association of Unit Trusts & Investment Funds (Autif), for example, told BBC News Online that the number of women requesting generic information about investment in unit trusts has increased dramatically.

In 1994, only 23% of requests for information came from women, compared to 41% in 2000.

Beating the men

But despite the fact that fewer women chose to invest in risky products, they actually manage to do better than the men.

A study carried out by the National Association of Investors Corporation (NAIC) for the University of California, found that the share portfolios of women earned on average 1.4% more per year than those of men.

Graph showing how men and women respond to different advertising techniques
The same survey found that men traded their accounts 45% more often than women.

This holds with research from a new report by social anthropologist Kate Fox which shows that women tend to be more patient and less impulsive than men.

Not only do the rapid switches in investment strategy fail to produce better returns, they also ran up far higher transaction fees.

Similar research from Germany's second biggest bank Hypovereinsbank found that the investments of its female clients outperformed male customers by 3%

"When they do take risks, women tend to be more rational and consistent and less impulsive than men," Kate Fox, author of the Sex in the City report told BBC News Online.

Gambling: stupid and gullible?

One reason behind women's reluctance to invest in stocks and shares is that they often see it as gambling rather than a sensible investment choice.

What men consider to be brave, women can often see as stupid and gullible

Kate Fox
The study revealed that most women express distaste or wariness about gambling, whereas men were either neutral or positive.

"What men consider to be brave, women can often see as stupid and gullible," says Ms Fox.

But it is not just a question of being scared of the element of risk, it's also a case of understanding it.

Misplaced confidence

According to a Financial Services Consumer Panel's annual survey, 42% of men said they felt confident when deciding which financial product to choose, compared with just 34% of women.

Small group work for the Sex in the City report showed that while both men and women were often ignorant about the range of financial products available, far fewer men would admit their shortcomings.

Pie chart showing that women are more reluctant to use the internet to manage their finances
And while women tend to steer well clear of that which they do not understand, men were more prepared to do a bit of reading and jump right in there.

"Women seem to have a deep suspicion against almost everything financial," said Ms Fox highlighting the more cautious nature of women.

"I think that women are more sceptical, used to City "wide boys"...Is an independent adviser really independent? It's a combination of confusion - not understanding what it's all about - and scepticism," said one of the participants in the study.

Targeting an audience

Advertising has contributed to the confusion.

FSA research shows that two-thirds of people who buy financial products find the language used in marketing material off-putting.

And facts and figures which boast about the strength of investment returns were also fairly meaningless, with few people knowing how to interpret them.

It is becoming increasingly important that the industry targets women as individuals with their own financial needs

Christine Farnish
And the advertising has traditionally been aimed at men, although many financial service providers are aware of the disparity and are now trying to redress this balance.

It was Virgin Direct, for example, which commissioned the Sex in the City report.

"It is becoming increasingly important that the industry targets women as individuals with their own financial needs," said FSA's Consumer Relations Director Christine Farnish.

And women gather information from different sources, with far fewer prepared to use the internet and financial websites to organise their finances.

A third of men say they regularly read financial pages in a newspaper compared to less than one fifth of women.

And only one fifth of women use an independent financial adviser - the vast majority of which are male.

But there are changes afoot here as well, with financial advertising in women's magazines almost doubling to 4m in the five year period between July 1994 and July 1998.

Winds of change

"There seems to be a definite shift towards women wanting to get financially aware and drop their inhibitions of risk," Ms Fox told BBC News Online.

In the US, the gap has already closed, with women now accounting for 47% of all investors.

Women have already overcome their natural caution in many traditionally male areas such as buying a house, risky career moves or adventurous physical activity.

"Having successfully overcome more cautious instincts in these fields, it is natural that women should start to lose their fear of risk in the financial products industry as well," says Ms Fox.

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