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Are women really better investors than men?
Studies show that female investors tend to make better, more cautious and less emotional investment decisions than their male counterparts – even during volatile market conditions.
Chantal Marx, Investment Research Head at FNB Wealth and Investments, said five key characteristics set women apart – accounting for their better performance in the investment space.
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Marx said in addition to outperforming their male counterparts, women recorded a much higher “risk adjusted return” in comparison.
She said according to a BlackRock survey, 72% of women rejected “riskier” equities, bonds, or real estate compared to 59% of men.
“A slower, measured, and less gambler-esque approach to investing generally results in higher returns [in] the long-term,” said Marx.
The investment expert said although it may come as a surprise to many, women tend to be less emotional than men when it comes to money.
As a result, the expert said women are more likely to avoid impulsive decisions and stay calmer during periods of market volatility.
US financial services company, Nationwide’s study revealed that 8% of women versus 15% of men are likely to liquidate their portfolios amidst market fluctuations.
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“It’s a terrible idea to sell you investments when markets are falling, because massive dips are almost always temporary,” Marx said.
“…And markets have always recovered following major shocks,” she added.
When it comes to trading, a study by Warwick Business School showed female investors on average traded nine times annually, while men traded 13 times.
“Higher levels of trading tend to diminish returns, and women make changes to their portfolios less often than men do,” said Marx.
The investment expert said women are “better at letting go” when they should.
“Loss aversion is a major emotional bias that limits investor success,” she said.
“[Men] are more likely to hold on to their [losses], hoping for a turnaround in fortune, than women are.”
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Marx referred to a study by Global Financial Literacy Excellence Centre at George Washington University, which indicated that women are less confident investors.
While 54% of women confessed to having high level investing knowledge compared to 71% of men, only 34% of female investors 49% of men felt comfortable to make investment decisions.
Marx said overconfidence is a “major emotional bias” inhibiting investment success.
“Being less certain could lead to more research [when making] buying and selling decisions,” said Marx.
Marx said studies on trade trends indicate that women are less likely to exhibit “FOMO” (fear of missing out), than their male counterparts.
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As an example, Marx referred to a 2021 study by Gallup Analytics which showed that 11% of US male investors owned Bitcoin in comparison to only 3% of women.
Marx also said a Hargreaves study found that trades such as GameStop and AMC Entertainment were dominated by male investors – who accounted for 86% of orders.
“The issue remains that women are less likely to invest in the stock market than men,” Marx said.
“…But the reasons for this could be exactly why they should invest in the first place,” she added.
How these key traits make women better investors? “Risk aversion, a perceived lack of wealth, and low confidence in their [own] abilities may aide rather than limit success in the equity market,” Marx said.
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