Should gender influence your portfolio?

The choice of investment depends on your ability to take risk

A long-time reader of our column posed a question: Should investment portfolios for single women be different from that for single men? Investment portfolios for single women are similar to that for single men despite the inherent difference in the risk-taking behaviour between the two genders.

Consider this. You invest to consume in the future. This could be in the form of lumpy expenditure such as buying a house or going on an exotic vacation. The choice of investment products for your portfolio is a function of your ability to take risk. This factor is driven by your current income and wealth. That means a 25-year-old single woman should have similar investment portfolio as that of a single man with similar economic background.

Investment research typically argues that your risk tolerance is measured by your ability to take risk as well as your willingness to take risk. We have left out willingness to take risk as a factor driving your risk attitude. Why?

To accumulate money to buy a beach house, you should be willing to invest accordingly. Suppose, you wish to save ₹50,000 per month for the next seven years. If you have to invest in both equity and bonds, that is what you should do. Therefore, your unwillingness to invest in equity does not really matter if you consider your goal of buying the beach house as important.

The argument is no different in old age, whether the individual remains single or is a surviving spouse. Why? The most important objective for a retiree is to earn stable income to meet post-retirement living expenses. The upshot is this: Your investment portfolio should contain assets that will earn the return required to achieve the life goal for which it is created. Your gender is not the driving factor. The above argument holds only if you self-manage your investments.

Behavioural biases

Capital-market regulators require investment advisors to risk-profile their clients. This allows your advisor to custom-tailor an investment portfolio based on your risk preferences.

Your behavioural biases are driven by the external environment such as the risk attitude that you have acquired from interaction with your family. Then, there is the gender factor. Despite the continual narrowing of the gap, there are differences in the risk-taking behaviour between men and women.

Your investment portfolio, if designed by your advisor, can therefore be different from that of a comparable male, given the same income group and life goals.

After you are married, the investment portfolio is created to meet life goals for the family. Till then, your portfolio may or may not be created considering your gender, depending on whether you self-manage your investments or hire an advisor.

The author is founder of Navera Consulting. Send your feedback to

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