Do Gender and Age Affect Your Investment?

What differences does gender make?

Let's start with an experiment.

Scientists invited 12 men and 12 women to participate in the experiment.

They showed the subjects 96 neutral to highly negative pictures and recorded their brain activities.

Three weeks later, the scientists asked the subjects to view 144 images, including the previous 96 ones.

Guess what?

Women recalled more highly emotional pictures than men did.

Brain differences between men and women may explain it.

Firstly, women use the left amygdala more often, while men use the right one.

Perhaps women encode emotional stimuli consciously, and men tend to use a visual-spatial strategy.

Also, women's brains are active in more regions than males.

How are the findings associated with investment?

It is probably safe to assume that women can remember bad investment experiences better.

It may explain the gender differences in investment risk attitudes.

In many investment decisions, women are more risk-averse than men.

Professor Rachel Croson and Uri Gneezy have summarized related findings.

For example, in pension plan asset allocations, single women are less risk-prone than single men.

Compared with married men, married women invest a smaller proportion in stocks.

However, is the brain the only factor that causes this difference? No!

A hormone called testosterone may also have its role.

Testosterone is known as a male hormone. But women have it in smaller amounts as well.

How does testosterone affect our bodies and investments?

For example, high testosterone levels will lead to more masculine facial features.

One study found that facial masculinity is positively associated with financial misreporting, insider trading, and option backdating.

Other studies also found that females of opposite-sex fraternal twins have a higher level of prenatal testosterone than other females.

They trade more often and buy more high-risk stocks than females of same-sex twins.

Environmental factors may also matter.

For example, society expects men to achieve more and women to be more collaborative.

Now, let's go further.

Have you ever noticed that men may seem to become gentler and more cautious as they age?

Yeah! Age is another factor that can impact risk attitudes.

Younger people may be more concerned with capital growth, while older people tend to be more interested in stable returns.

However, we can't deny that aging is inevitable, especially the cognitive decline!

Imagine when we get old. What may happen?

We will have slower perceptual and processing speeds and less working memory capacity. We will be less able to suppress irrelevant stimuli and our flexibility and imagination will diminish.

A study of subjects aged 50 or older came to the following conclusions.

Cognitive ability is related to the risk a person is willing to take.

Also, cognitive ability explains the 85% association between age and risk attitudes.

Now we can see a more precise mechanism.

Cognitive decline with age will reduce our investment abilities, making us more risk-averse.

Sounds upsetting? There is good news!

To some extent, cognitive decline is not absolutely inevitable!

Just like exercising muscles, we can reduce cognitive decline with exercise.

We can take a look at other studies.

One study found that older people who participated in various brain training games better improved their fluid intelligence, like memory and reasoning ability.

Another study found that older people with higher educational attainment could cope well with natural declines in brain functions.

Don't be afraid. There is always something we can do.

In this video, we talked about how gender and age affect investment risk attitudes.

Please note that it is a general situation and may not work for everyone.

However, we can see ourselves from a new perspective.

Ask yourself three questions.

Are you risk-averse or risk-prone?

How do bad memories about investing affect you?

Is your cognitive ability improving or declining?

In that way, something may be changing.