Testosterone And Wealth: Are Testosterone Levels Money Related?

Ben BA(Hons), PGCert

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Men, Money and Testosterone

It seems that when it comes to investing and creating wealth, for men, their decisions are massively based and influenced by testosterone.

Does this mean then, that these decision are bad and unprofitable in the long term which would have a negative effect on wealth?

Are women better investors?

If you look at the history books and note who the people are who made huge losses, you will see that they are are all young males.

So, with this in mind, is it better to leave testosterone at the door and find a financial advisor who can look after and create more wealth for you that is a woman?

The stats would suggest so.

The Queen of England would have been particularly miffed to see that Nick Leeson pretty much single handedly collapsed Barings bank which was the second oldest merchant bank in the world and handled her money.

It seems that when it comes to investing, men are less likely to dig deep and study the facts.

This can lead to inaccuracies and snap judgement decisions based upon a feeling of being correct which is fueled by testosterone.

[http://www.caltech.edu/news/testosterone-makes-men-less-likely-question-their-impulses-55864]

This is because higher levels of testosterone make men rely on their intuition rather than taking a step back, questioning and then evaluating their gut reaction.

In tests, whereby men were given a testosterone patch to increase their levels of testosterone, the results showed that the men with the patch scored poorly regarding cognitive reflection over decision compared to men who took a placebo patch.

The men who were subject to higher levels of testosterone made decisions without questioning themselves, posing the question whether testosterone itself is able to inhibit the process of mentally checking something.

Even with money and earnings at stake in the tests ($1 was offered for every correct answer and $2 is every answer was correct), those with higher testosterone appeared to have their judgement blocked by a higher level of confidence that made them answer questions more quickly.

The results were that those with higher levels of testosterone scored 20% less than those who were not administered a testosterone patch.

Research has also shown that women make fewer trades than men, who seem more confident in their strategies and traded more often than their female counterparts.

This can be an expensive risk when the chart above is considered.

Consistent Risk?

We wrote an article whereby when you win your testosterone levels rise, this makes you more confident and as such the cycle means you should keep on winning.

This means coupled with snap decisions the risk reward factor comes in to play which could be detrimental to your investment portfolio.

This is because every trade which is won will increase testosterone and confidence, therefore after a number of wins and with an overconfident strategy there will be a large loss on a high risk investment.

Females Are More Profitable

Overall, female investors perform better than their male counterparts in the long term as they are less likely to make aggressive, snap decisions and even revenge decisions.

This is reflected by their performance in almost every investment category and over a six year period outperformed men by 6%.

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