In the growing career of personal finance, understanding the behavioral attitudes of investors is essential for delivering effective and personally tailored advice. One area where differences have been observed is how women and men see and manage investment risk. These gender-based differences are not only shaped by individual preferences but also by psychological and economic factors. As financial advisors, recognizing these patterns can improve communication, client satisfaction, and lead to better investment outcomes for our clients.Research shows that, on average, women display lower risk tolerance compared to men. While this is often thought of as being more conservative, it may be more accurate to say that women tend to be more aware of risk. They often prefer consistency and long-term security over quick short-term gains. Studies have shown that women are more likely to choose diversified portfolios with moderate growth potential and stay invested during market fluctuations.

On the other hand, men are usually more confident in their investment decisions, sometimes to a fault. This confidence can lead to higher risk tolerance and a tendency to engage in speculative behavior. While this may create higher returns during bull markets, it will then lead to greater losses during a market downturn.

Behavioral differences spread beyond risk awareness and into actual investment habits. Men tend to trade more often than women, and this excessive trading reduces their net returns. Overconfidence is more prevalent among male investors, leading to unnecessary portfolio changes and poor timing decisions.

In contrast, women are more likely to follow a buy-and-hold strategy, which generally results in better long-term outcomes due to lower transaction costs. Women are more cautious about investing, including more consistent contributions and a stronger focus on goals such as retirement, yielding a more stable portfolio performance over time. An additional difference is the motivation and focus behind investment choices. Women often look at investing from a goals-based view. By this, I mean they tend to invest with specific life goals in mind, such as retirement security, funding a college education, or creating a legacy. This long-term direction encourages disciplined saving and a more consistent asset allocation.

Men are more often performance focused. They measure success by outperforming the market or peers. While this competitive mindset can encourage risk-taking, it may also increase a tendency toward short-term market movements and reactive decision-making.

Most women often underestimate their financial knowledge, even when their actual understanding is comparable with or exceeds that of men. A lack of confidence can cause reluctance in making investment decisions, which leads many women to rely more on professional financial advice. For advisors, this opens an opportunity to build trust and empower women through education and planning.

Consequently, male clients may project higher confidence in their financial abilities, which can sometimes result in resistance to guidance or overlooking risks. As advisors, we need to be cautious not to mistake confidence for competence, and we should ensure that risk assessments and recommendations are rooted in objective data and personalized insights.

Factors like income inequality and career interruptions may also add to gender investment behavior. Women often face lower lifetime earnings due to wage gaps, caregiving responsibilities, and longer life expectancies. These factors can lead to more cautious investment strategies and a greater emphasis on capital preservation. Therefore, women may allocate a higher proportion of their portfolios to bonds or cash equivalents, because they anticipate longer retirement periods or erratic work income. Men may feel more financially protected and therefore more comfortable taking heavier stock positions.

Psychological and financial factors shape gender-based differences in investment risk tolerance and behavior. While these general trends provide valuable insights, the most effective financial advice comes from treating each client as an individual, “personal” financial planning. By acknowledging these tendencies, and adjusting communication and planning strategies accordingly, we can better serve our clients and help them achieve their financial goals with confidence.

The material discussed in this article is meant as general information and should not be taken as legal advice.

Rick Hedderick, MBA, CFP, is an Associate Teaching Professor of Finance and the Certificate in Financial Planning Program Director at Penn State Behrend, Sam and Irene Black School of Business.

Editor: Greg Filbeck, CFA, FRM, CAIA, CIPM, PRM, Samuel P. Black III, Professor of Finance & Risk Management, Penn State Erie, mgf11@psu.edu.