Sunday, March 21, 2010

Women and Men: Investing and Giving

An article in The New York Times Sunday, March 14, 2010 issue caught my attention.  It was titled, "How Men's Overconfidence Hurts Them as Investors," and reminded me of the oft-mentioned question, "What if the Lehman Brothers Had Been the Lehman Sisters?"  Would the Lehman sisters have been such risk takers as to have helped cause the recent downturn in our economy?

According to John Ameriks, head of Vanguard Investment Counseling and Research and a co-author of a recent study by Vanguard, "Male investors, as a group, appear to be overconfident." Perhaps in the uncertain market of the past few years, greater caution might have been advantageous.

The Vanguard study went on to conclude that during the recent financial crisis, men were more likely than women to trade--and to do so at the wrong times.  In another study in 2001 titled, "Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment," more than 35,000 households and their investing behavior were analyzed and men traded stocks nearly 50 percent more often than women.  The Times article written by Jeff Somer, says this added trading drove up the men's costs and lowered their returns.  "Numerous studies show that men are more prone to make this particular mistake than women," says Somer.

One can only wonder what might have happened during the economic downturn at our institutions and organizations if there were more women on boards, financial committees and as advisors? What would endowments and investments have looked like if more women had seats at the tables?  Would there have been a better return with women involved?

You may ask, what does all this have to do with philanthropy?  Well, we know that it takes more time for women than men to make a decision about giving.  But once she's given, she remains loyal, just as when she invests.  Yes, there is a great deal of relationship between investing and philanthropy.  And gender makes a difference in both.  Most large financial firms understand this and have been focusing on those differences and on women in particular.  So too should non-profits.  Not only because women make up over half of the U.S. population and control over half of the money, but because it seems women are better investors as well.

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