The Female Investor [Post 8]

Intro

Who do you believe are better investors - men or women? According to a Fidelity Investments study…

Fidelity Investments® 2021 Women and Investing Study. (2021).

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/FidelityInvestmentsWomen&InvestingStudy2021.pdf

Contradicting Factors

In another research study by The Motley Fool, female investors are outpacing men by up to 1% better returns despite these puzzling facts:

• Only 9% of women reported they believe they make better investors than men.

• Only 44% of women invested outside of retirement accounts as of 2018.

• Women hold 13% more cash and fewer investments in their portfolios compared to men.

• Women generate less overall trading activity per account.

Backman, M. (2022). Women and investing: 20 years of research and statistics summarized. The Motley Fool.

https://www.fool.com/research/women-in-investing-research/

How are women outperforming men despite the appearance of being less financially savvy?

Behavior

Women beating men in the male dominated investment industry can be summed up simply – demeanor.

A study from the 1990s found that men traded in their accounts 45% more often than women and were hurting their overall returns by 2.65% per year on average.

Barber, B. & Odean, T. (2001). Boys will be Boys: Gender, Overconfidence, and Common Stock Investment.

https://faculty.haas.berkeley.edu/odean/papers/gender/BoysWillBeBoys.pdf

Women are finding more success because they are doing less to sabotage their portfolios. Proof that more people are capable of being successful passive investors than they realize.

Excess trading can create fees, tax consequences, and worse performance by failing to correctly time buying and selling in the market. These are regularly the reasons behind why people hurt their investment performance.

Image Source: Lieber, R. (2021, October 29). Women may be better investors than men.

Let me mansplain why. The New York Times.

How to use this Information

Women tend to bring a more simplistic and levelheaded approach to investing, making them better investors on average. Finding a basic diversified portfolio to consistently invest in over time is generally a better approach than trying to make active investment decisions.

These findings should be encouraging for those interested in letting their money work for them in the market but fear they aren’t well informed. News flash: most people aren’t well informed – at least that is what the data would suggest.

Investing has evolved in recent years, making it easier than ever to participate in earnings growth. Today it is possible to be globally invested in thousands of companies by owning a single fund. A little due diligence up front and long-term patience in the market can assist your financial future in a big way.

Don’t let gender bias or imposter syndrome keep you from reaching your financial goals.