The Truth is Revealed: Women are Better Investors
By Katie Bruno, CFP®, CDFA®, MIMFA
Some of the world’s best investors are people who don’t even know it.
When it comes to money management capabilities, many women, regardless of education or professional achievements, doubt their capabilities to invest and save money effectively. The 2018 Fidelity Investments study, “Women and Money,” found that only 9% of women thought they were better investors than men, despite all the evidence that suggested that women are, in fact, better investors. In this article, we discuss three specific traits that women tend to use more frequently, which helps them to be better investors.
Regardless of your level of investing experience, there are certain traits that can prove advantageous to anyone.
As it just so happens, many of the traits that aid a person’s investment savvy are inherent in women, including:
- The ability to think long-term and holistically,
- Having patience,
- A willingness to deal with mistakes, and
- Recognizing when help is needed.
Women Prefer Safety
Generally speaking, women prefer to participate in safer and less-volatile investments with consistent track records. Research shows that women do value protection, but instead of viewing this negatively, we should view this as an asset.
In my client base, it is rare for investors to call me and ask what the hottest stock, mutual fund or sector is. After all, they have hired me to handle that for them. However, I do have a handful of clients who call with ideas such as wanting to invest too much money into a single stock or taking on way more risk than they should. Impulsive decisions such as these tend to come more frequently from my clients who are men.
Most investors, both women and men, are better off investing in mutual funds or exchange-traded funds and completely ignoring stock picking altogether. The key here is to keep it simple, and invest in a broad and diversified portfolio.
Women Do Not Time the Market
Investing is not a competitive sport. It’s not a measure of self-worth, and it’s also not a platform for bragging about “how you beat the market.” Investing is a means to pursuing your financial goals. There have been noticeable differences in the way each gender responds to market swings. While we all react differently to losses and gains, overconfidence can make an investor more prone to impulsive behavior, or buying when times are good and selling when times are bad.
Charlie Munger, Warren Buffett’s long-time business partner, once said the best thing to do is “sit on your ass” and let your investments work for you. Which is what women tend to do: save, invest, and then forget about it!
I want to emphasize here that this is different from ignoring your investments. Some investors suffer because they make an investing mistake and then fail to recognize or deal with it. They buy something that performs poorly and hang on to it, waiting for it to turn around. There is a difference with timing the market versus adjusting a strategy that hasn’t worked.
Women Trade Less Frequently
There are several studies that have all come out with the same general conclusion. The study, “Boys will be Boys: Gender, Overconfidence, and Common Stock Investment,” looked at investments from 35,000 households of men and women, and found that men traded 45% more frequently than women, but women outperformed men by nearly 1% per year. Another study, conducted by Nordnet, a retail broker in Scandinavia, found that men, on average, make 12 transactions per year while women only make four. Men also tend to be overconfident, which can lead them to believe they control outcomes more than they actually do - a mentality that often leads to over-trading and higher transaction costs that dilute performance.
Working with a Morey & Quinn Financial Professional
Being a good investor doesn’t mean that you have to navigate it alone. A financial professional can help you with creating and implementing a plan, selecting investments, monitoring their performance and adjusting the plan when your life changes.
As a well-respected Omaha financial planning team, Morey & Quinn Wealth Partners provide our clients with resources and tools to help keep things in perspective, especially during times of volatility. We are here to help you define your goals, set up your strategies, and monitor and adjust them as needed. Schedule a complimentary discovery session, or contact us to review a plan already in place.
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Any opinions are those of Katie Bruno CFP®, CDFA®, MIMFA, and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.
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