On International Women’s Day (8 March), it’s worth asking whether women are better investors than men.
That’s because both men and women possess different character traits when it comes to investing in stock markets.
Overall, though, the evidence out there seems to suggest that women make better long-term investors. Here’s why that’s the case.
More investing, less trading
One of the key takeaways from many studies has been the fact that women, on the whole, are more risk-averse when it comes to investing.
That can clearly be a positive thing – thinking about risk – when making investment decisions.
Indeed, an extensive study in the US (of 35,000 households in the 1990s) found that over a period of six years, men engaged in 45% more trading activity than women.
Men, who are generally more impulsive, have been found to dive into buy/sell decisions on a much more frequent basis than women.
We all know that over-trading can lead to a significant erosion of long-term returns in the stock market.
Doing proper due diligence
While many studies have found that women are less confident than men when it comes to the investment world, they make up for it by being much more thorough in their process.
That’s because women who deem themselves “confident and knowledgeable” when it comes to investing, actually have a much more rigorous incestment process than their male counterparts.
Local bank OCBC found exactly that in a Women’s Insights survey it carried out.
Indeed, of the cohort of women who classed themselves as “confident and knowledgeable”, 52% did their own research when making an investment decision.
That compared to just 37% of men who deemed themselves “confident and knowledgeable”.
Even worse, men were more likely to follow tips from friends/family as well as not do any research at all. Unsurprisingly, that leads to better investment performance (see below).
Source: OCBC Simply Spot On: Women’s Insights
Winning on the returns front
This outperformance has also been found in widespread studies. In fact, in Fidelity’s 2021 Women & Investing Study, it was found that women outperformed men by 0.4% per year.
The study was carried out over a decade and with a sizeable sample of 5 million Fidelity customers. That significant outperformance certainly adds up over the long term.
Meanwhile, other studies have found that women actually perform better and post superior returns to men but with a lower risk level attached too.
Women as investors for the long term
It’s clear, from the evidence, that women – broadly speaking – tend to make better investors over the long term than men.
That’s down to their own characteristics and tendency to thoroughly research their options. That’s no bad thing when investing.
So, on International Women’s Day, we should be celebrating the fact that women have proved themselves to be truly long term in their investment approach while also responsibly managing risk.
