Do women make better investors than men?
Posted September 27, 2016
While there are more men than women in the investment industry, studies suggest that women are the better investors.
The data on investing habits of men and women show that tend to invest with more confidence than women, but this doesn’t necessarily translate into success, The Motley Fool noted. The worst rogue traders, the ones who lost billions of dollars in their careers, were all men in their late 20s to late 30s, TheStreet reported.
The surplus of rogue traders who happen to also be men should not entirely be attributed on a gender-based skill set as women are under-represented in the financial world, which naturally skews some statistics toward the men. TheStreet noted that only 15 percent of investment bank traders are women.
But there’s empirical evidence that suggests women have the skills to pay the bills:
• One study had fund company Vanguard examine trading decisions of 2.7 million retirement account owners from early 2007 to October 2009, “right at the peak of the financial crisis,” TheStreet noted. Men in the study were found 10 percent more likely to cash out at a loss than women.
• A 2001 study, “Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment," found that men traded stocks 45 percent more often than women. Extra trading reduced men’s net returns by 2.65 percentage points a year, while trading hurt women’s net returns by only 1.72 percentage points.
Women have less tolerance for risk, and tend to have more balanced, less volatile portfolios with conservative weightings, and like buying stock “in companies they know and understand,” according to a study by the Financial Industry Regulatory Authority, Business Vancouver reported.
As women generally make less than men and are likely to outlive their male counterparts by about five years, good investing skills on their part are needed, the blog iberkshires noted. Making less money than men gives women more incentive to save.
“Over 150 psychological studies have shown that most women are great at saving, but saving alone won't save you,” wrote Bill Schmick, an investment adviser, for iberkshires.
Fidelity Investments found that 92 percent of women want to learn about financial planning and 75 percent want to become better versed in investing, according to Business Vancouver. But while “these are encouraging numbers,” lacking confidence holds many back, with only 47 percent of women confident discussing money and investing with a professional, it continued.
And the FINRA study also found that while women “inherently possess 'the right stuff' for successful investing,” they often don’t start until circumstances such as death or divorce compel them to, whereas men get involved gradually over time, Business Vancouver reported.
Schmick said the best investor trait women show is an “ability and willingness to ask for help,” and that when they get sensible advice “they stay the course, despite the ups and downs which are always present in financial markets.”
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