Research undertaken by BT Financial Group covering investor behaviour over most of the past 30 years is continuing to confirm that women tend to make better investment decisions than men, and that wealth and age provide little advantage.
The research, presented to the Financial Planning Association national conference in Melbourne by BT Financial Group head of wealth and wrap solutions in Western Australia Michael Parker, represents an update on material first released by BT in late 2005.
However, the good news for financial planners to emerge from the research is that managed funds represent a better bet for investors than direct share investment.
Looking at the so-called ‘disposition effect’, under which investors are seen to dispose of their best-performing investments too quickly while holding their worst-performing investments too long, the BT research suggests that investors are less prone to such habits when dealing with managed funds.
“Managed fund investors are not prone to the same bias as their direct share counterparts,” Parker said.
“Managed fund investors appear to be better than their direct share investors at getting rid of the dead wood and booting their winners home,” he said.
Parker said the research had thrown up a number of surprising outcomes, including with respect to investment profiles, where people aged in their 50s and invested in conservative options were found to be more likely than younger investors to hold their investments too long.
Similarly, he said the research suggested that being older or richer was no guarantee that an investor would make the right decisions, with older and wealthier investors emerging as more likely to exhibit a bias towards the ‘disposition effect’.
Parkinson said an examination of the data relating to men and women also revealed that men were more likely to exhibit a bias towards the ‘disposition effect’ than women.
“We found that female investors had a greater appetite for growth than men, and this was something that became more apparent with age,” Parker said.
He said that one reason for this might have been that women experienced periods out of the workforce while having families and were more focused on investment growth to fund their retirement.
