Here are a few things your spouse, partner, friend, brother or sister can teach you:
If you're a man:
- Diffidence. Terrance Odean and Brad Barber, both professors of finance at the University of California, completed a study in 2001 called "Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment." The title says it all: Men, in general, tend to be a bit too surefooted when it comes to investing. "We found that men traded more actively than women, and so attributed that, at least in part, to overconfidence, being too sure of themselves in terms of stock picking and too willing to trade on perhaps too little information," explains Odean.
- Perspective. Keep in mind that these days, the average investor who trades actively is in competition with professional investors who have more experience and better information. It's very difficult to win.
- Take more risk. That's right – men may be taking too much risk, women too little. The key, of course, is to strike a balance. Odean says there is evidence that women tend to invest less in equities, likely because we're a bit more risk adverse. But equities are a key part of your portfolio. They are a primary contributor of growth, which will help you hedge against inflation and earn more money.
- Understand asset allocation. Even if you're knocking on retirement – or in retirement, for that matter – you need stocks in your portfolio. A good rule of thumb is to subtract your age from 100. The answer is the percentage of your portfolio you should have in equities: If you're 40, that's 60%. "I don't know what the magic number is, but I do know it isn't zero," says Odean. "And so I think a lot of women would benefit from being a bit more aggressive in their overall portfolio, in terms of asset allocation, but not in terms of trading."