When it comes to investing, women and men are worlds apart. While many may look at women as the weaker séx, female investors actually capture stronger rates of return than their male counterparts.
Women outperform men by 40 basis points, or 0.4%, on average, according to Fidelity’s 2021 Women and Investing Study. This positive margin can translate into millions of shillings over time.
The Fidelity study reports that only one-third of women surveyed see themselves as investors, meaning only 33% feel confident in their ability to make investment decisions. “If female investors have any weakness, it’s their mistaken belief that they are not good investors,” says Meghan Railey, co-founder and CFO of Optas Capital.
Women share certain characteristics that make them both savvy savers and intuitive investors.
Thoughtfulness and discipline. While male clients tend to eagerly invest in the latest asset class everyone is talking about, like cryptocurrency, female clients do not generally jump on the shiny bandwagon. They tend to take their time to explore investment opportunities and stay in their investments longer. This mindset follows one of our firm’s guiding wealth management principles: Sooner or later, the consensus is always wrong.
Curiosity and interest. Women are more engaged in learning about the “how’s” and “why’s” of investing. They want to understand the planning, investment selection and management processes to make informed, confident and stress-free decisions.
Mr Peter Hodson, CFA, the founder and head of Research at 5i Research Inc., an independent investment research network helping do-it-yourself investors reach their investment goals, adds some insights into women and investing.
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Patience/nurturing: Women investors tend to have far more patience than men when it comes to investing, Hodson says, and calls it the mothering instinct. Women are more likely to give an investment the time it needs to perform well. Men, on the other hand, watch quarterly earnings too closely and will often sell an investment at the first sign of trouble. Women tend to see the longer-term picture, and can often look beyond short-term problems.
More willing to admit to mistakes: Men do not like to admit mistakes. This is the “it’s not my fault” syndrome. Men will blame the market, short sellers, Central Bank, a company CEO or anything or anyone really, rather than admitting that, yes, they were wrong and they shouldn’t have bought that loser stock.
Trade far less: Men feel they have to do something in the market. They react to immaterial news, sell if a broker reduces a stock rating and buy a lot of speculative stocks, aiming for the big score. But often the best thing to do is nothing. Women understand this. There is no rule that says you have to be active. Trading adds costs, results in taxes and, thus, less capital is available to compound over the years.
Research more diligently: Men often like to take a flyer on a highly speculative investments, whereas studies have shown that women actually do much more research before investing. Not all are financial analysts, but women read more, study as much as they can and understand the risks of investing. Men, simply, don’t.
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This story of women’s power in investment is brought to you by Black & White blended scotch whiskey. Women are known to be savvy investors due to their sixth sense making decisions.
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