Women are good investors, sometimes better than men…
We have all heard the saying that men are from Mars & Women are from Venus & quite frankly this saying is not far from the truth. Men & women are often stuck in gender stereotypes such as the woman being the caregiver and the man being the breadwinner. These stereotypes are becoming instinct and more women are achieving career and financial success. There are however still many characteristics that make a man a man and make a woman a woman.
Men and women have different approaches when it comes to investing. Some differences are:
- Women are more risk averse than men ( women play it safe, men love risk). It has been proven that female investment managers have a tendency of being more conservative than their male counterparts. Apparently this stems from our biological history. As mothers we have a “protective” and conservative outlook on life in order to protect our young. In this case we are protecting finances. Women have a tendency to “buy and hold” and stick to the safe bets. Men trade a lot more than women and take more risks.
- Men are overconfident (women on the other hand are sometimes not confident enough). It has been said that women often lack the confidence when it comes to investment knowledge. Men however worry less and do not worry as much about what they know or do not know.
- Men hold losers longer than women: Men do not like to admit that they are wrong and have a tendency of holding the losers longer than they should. In addition men enjoy beating the other guy and love to brag about it.
- Men suffer from positivity illusion: Men believe that everything will be alright and will get better no matter how bad it is. Women on the other hand are more realistic.
- Women are more disciplined when it comes to investing and like to be in control (men have careless tendencies).
- Women plan better for the long term ( we cannot help it, it is in our nature).
Many articles suggest that women tend to make better investment decisions in the long run than men. A study by Terry Odean proved that single female investors outperformed single men by 2.5%, female investment groups outperformed males by 4.6%.
Why is that you ask? Behavioral finance studies blame overconfidence. Men have a tendency of trading more and have more chances of making the wrong decisions (the opposite is true for women). In his research, Odean revealed that men investors traded on average 45% more than did females.
The conclusion is: women love to be in control, they are always more careful with everything they do (the opposite goes for men). Women and men have different emotional responses. To be more precise, in a situation of disaster, a men will feel anger and a women will feel fear. Therefore women have a tendency of taking less risks, especially in situations of uncertainty.
In her book “Warren Buffet invests like a girl: and why you should too ”, Louann Louff suggests the following: trade less, avoid too much risk, don’t be overconfident, have realistic expectations, do your research, ignore the herd mentality and most importantly: LEARN FROM YOUR MISTAKES.
With that being said, ladies I think it is time for you to invest!
Author: Karolina, guest writer