When I started this blog, one of my mentors (a man) said to me, “You will be at a great disadvantage as a woman in writing a financial blog. No man will ever read it. ”(Millions of views and tens of thousands of subscribers later – half of whom are men – he has been proven wrong)
In engineering school, as a woman, I was outnumbered by 8 to 100 of my male classmates.
And finally, at work there were two men’s baths for each women’s bath in order to do justice to the high male-to-women ratio in my area.
Women still make 80 cents for every dollar a man makes. And because we have the disadvantage that the biological clock is ticking and we have to retire from working life because of childcare, we lose even more earnings, salary increases and promotions.
However, there is one area where women have been shown to excel over men:
Although we have less confidence in our investment skills, women’s portfolios tend to outperform men’s portfolios over the long term.
According to a study by the University of California, women outperform men in investing by 1% per year. That may not sound like much, but over 30 years a $ 1,000,000 portfolio is 6% versus 7% over $ 70,000!
Why is this?
Well, here are the reasons women are better investors than men:
Women don’t treat investing like a tail-wagging competition
Higher testosterone levels make men feel invincible and take oversized risks. It’s also why they compete against each other in increasingly disgusting competitions until they lose their shirt.
Wall Street is full of straight-haired Gordon Gecko guys bragging about how their picks are hitting the market.
If indeed one of the most successful investors of all time is a woman named “Geraldine Weiss”.
You’ve probably never heard of her, but she published a financial newsletter with stock recommendations that delivered + 11.2% returns over 30 years, outperforming the S&P 500 9.8% returns. It did so not by betting on the next hot stock, but through strict rules like requiring a dividend growth rate of more than 10% over 12 years and selecting companies that traded less than 20 times their earnings and whose debt was less than 50% of market capitalization.
She’s like a female Warren Buffett, but most of us never get her on our minds because she prefers to lead a quiet life away from the spotlight.
Since women do not feel the need to “arm” each other with riskier and riskier blows, we tend to invest long-term and only take calculated risks.
GameStop, Bitcoin, cannabis stocks. Our inboxes are full of emails suggesting these speculative “investments”. The one common denominator? They are always written by men. I’ve never heard a woman say, “Yo, you have to buy GameStop or you’re missing out!” Neither have I ever heard a woman brag about how much she made Bitcoin or how “boring” index investments are are.
Women do not confuse gambling with investing. When it comes to investing, boredom is good.
Women don’t dance on and off the market that often
Cal-Berkeley researchers analyzed the investments of over 35,000 households from February 1991 to January 1997 and found that men acted 45% more often than women.
This study was aptly titled “Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment”.
The less you dance in and out of the market, the higher your returns. Because of this, our net worth grew from $ 1 million to $ 1.7 million, despite having traveled the world without a job in the past 6 years. If I had freaked out during the 2008, 2015, and March 2020 market slumps and sold everything, I would have missed the following massive gains. When it comes to buy-and-hold strategies and long-term investing, the less you trade, the better your returns will be.
By staying invested rather than trading frequently, women tend to outperform men in the long run.
Women don’t confuse luck with skill.
Seasoned investors know that you cannot predict what the market will do on a daily basis. We’re in for the long game. All short-term gains are attributed to luck rather than skill.
However, psychological studies have shown that men are more likely to attribute their success to their own abilities, while women are more likely to attribute it to luck. This causes them to feel the urge to buy more in a bull market and sell at a loss in a bear market. They think they can control the outcome, but in reality it just makes them buy high and sell low. When you are too sure of your abilities, you tend to think that you have to “do” something because you have the ability to predict the market. Instead of doing the right thing, which is buy and keep.
Because women attribute their investment gains to luck rather than skill, they do not fall into the “illusion of control”.
In addition to results from the University of California, Warwick Business School found that out of 2,456 investors, women in the group outperformed men by 1.2% per year. Fidelity also conducted another study which found that among the 8 million investment accounts examined, women achieved higher returns and better savings rates.
Obviously, these results do not represent every woman or man (or those who cannot identify with any of the camps). There are always exceptions to the rule. There are women who invest like one
tail Clitoris Winking Contest and Men Who Are Careful.
But when it comes to the stereotype that men are better investors than women, statistics have shown that it just isn’t true. It’s just that we’re less sure of our abilities. Paradoxically, our results tend to be better. And even in that regard, there is good news. Over time, our confidence in our investment skills grows as we age. According to the Financial Industry Regulatory Authority (FINRA), 46% of millennials are confident enough to manage their own investments, while 54% of baby boomers are.
So, if you are a woman and you are cautious and nervous about investing, don’t be discouraged. Who cares if you don’t know the first thing about options trading? You do not have to. Remember, slow and steady wins the race. Be the turtle, not the rabbit. Your caution is a feature, not a bug. If you haven’t started investing yet, visit our investment workshop and get started for free.
What do you think? Do you think women are better investors than men? And if you don’t identify with either, what is your investment style and has it helped or hurt you?
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