Is There Gender Bias in Investing?


We took a look at the Personal Capital user base to see if whether the oft-cited fact that women are less risk-tolerant than men holds true for our users. Our data reveal the following:

  • On our 1-5 scale of risk tolerance, women are on average 7 percent more risk-averse than men.
  • The effect of gender on risk tolerance is greater than that of any other variable.

Why is this significant? An investor’s risk tolerance is pivotal in determining an investing strategy and ultimately, a portfolio’s returns. The fact that women are more risk-averse than men means they may be systematically leaving returns on the table. We calculate that this may translate to 30 basis points (bps) per year. Over a long investing horizon, that difference could mean a woman’s portfolio is more than 10 percent smaller than a man’s.

In the following post, I first discuss our data analysis and then compare hypothetical portfolios to illustrate the opportunity loss of a lower-risk portfolio. I then discuss measures that can be taken to empower women — and men — to make better investing decisions.

Female Personal Capital users are more risk-averse

To see how risk tolerance compares among female and male Personal Capital users, we examine the data of users for whom we have both demographic information and data on risk tolerance. Demographic data include gender, age, retirement annual income range, net worth range, tax rate range, and number of years employed.