[dropcap]L[/dropcap]ooking to make a sound investment? Perhaps your adviser should be a woman. Studies show that women have a different approach to investing than men and, thanks to biology and psychology, they are often more successful.
A woman’s lack of testosterone can make her a more disciplined investor, says LouAnn Lofton, author of Warren Buffett Invests Like a Girl—And Why You Should, Too.
“Testosterone can help traders take risks and move fast, making loads of money in the meantime,” she writes in her book. “But too much testosterone for too long can encourage too much risk taking. … The way women tend to approach investing is healthier and calmer, and it’s the way we should all approach investing.”
And here is why.
1. They invest in what they know: Kelly Keenan Trumpbour, founder of See Jane Invest, a website that educates women who are interested in investing in entrepreneurs, women have an advantage when it comes to choosing companies that have a good chance of success: “Women make 70% to 80% of household buying decisions,” she says. “We’ve been subjected to marketing since we were young. That means we’ve developed a filter or litmus test about what’s a valuable idea.”
2. They band together: The most successful angels usually belong to angel groups where they share information and expertise. Women are hardwired to be team members. Women, in general, have little problem admitting that they do not know something and asking for advice. They are also more than willing to share lessons learned, while as men may be oriented more to keeping their cards close to their chest in the fear of giving away some competitive advantage.
Women also have a “we’re all in this together. A startup company may benefit from this female win-win orientation in contrast to a situation where investors’ interests are pitted against entrepreneurs.
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3. They do their due diligence: Women take their time before investing in a company. They spend time on research and pay attention to red flags. Brain research shows that women are hardwired to read people better. If the information an entrepreneur or manager is saying doesn’t match their body language, for example, they will often pick up on that. Successful investors have those people-reading skills.
Women also take their time before deciding to invest. A 2008 study from the University of California, Santa Barbara, found that men who feel they are being observed and judged by their peers tend to make riskier choices in order to assert their dominance. Women, on the other hand, didn’t have this reaction, and tend to bring more consistent decision-making patterns to all situations.
4. They follow up: Men tend to invest in companies within sectors where they have expertise, but sometimes this can get in the way. Women look at investing and say, ‘My job is to be here when you need me, and your job is to go work your rear end off.’ If women don’t think the business could succeed on its own, they don’t invest.
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