Why Investing Women Rock and You Can Too

Men vs Women Investing

This article comes from friend and blogger Maria Nedeva.

A couple of days ago I was browsing a forum on an investment-focused site. It was smooth reading, until I read: “…Women can’t invest because their heads are full of shoes and handbags.”

My disbelief rapidly matured into growing irritation.

Hold on a minute! I like my handbags as much as the next woman, and I may not be an investing genius, but I am financially successful. I have an impressive, self-made net worth and a growing, self-directed investment portfolio. Okay, so I invest with my husband, but the decisions are joined and the discussions are shared.

Investing Women Rock

Did you know that there is growing evidence that investing women outperform investing men consistently?

A recent Washington Post article revealed women’s portfolios outperform men’s by an average of 1%. Terry O’Dean, a professor at the University of California, studied stock picking by gender for several decades. He found that single female investors outperformed single male investors by 2.3% and female investment groups outperformed their male counterparts by 4.6%.

Similarly, a study done by researchers at the University of Exeter in the UK found that the gain of investment funds managed by women was 0.68% and funds directed by men made only 0.37%. You may feel skeptical if you wish but these guys analyzed 80,000 trades.

Still, There Is a Problem

The problem is that still very few women invest. For instance, in the UK, only 20% of women have an investment portfolio (including retirement investments), and only 2% of angel investors are women, despite their growing wealth.

Similarly, a study in the US found that men’s average IRA balance was 72 percent more than the average woman’s; men also have 30 percent more in taxable investments than women.

Why is this a problem? Because, the combination of the looming pension crisis, the breakdown of the extended family, and female longevity means that many women who don’t invest today will probably find themselves with little to live on in the near future.

This problem needs to be addressed and more women should start investing. But I doubt they will gain the confidence to do so by playing on their fear and dishing out criticism.

I believe there are 4 key reasons for women’s financial success and investing awesomeness, or, why investing women rock.

1. They Do Their Homework

Investing is a mixture of science, art and gaming. I don’t know about you, but I research my investments meticulously. And I’m not alone in this: most women around me do the same.

We research using variety of sources, we discuss our choices with members of the different communities we belong to, and we also weave in some professional advice when and where appropriate.

One aspect investing women are not so good at is gaming. We are naturally much more conservative and risk averse. We try to minimize risk. As a result, we end up with much more conservative portfolios. Conservatism is a great strategy in times of crisis, though not so great in times of economic boom.

2. They Think about the Consequences

Women think a lot about consequences before taking action and take a longer-term view. Researchers have tried to explain this using biology and/or motivation.

To my mind, this ability of women is evolutionary: Raising children and growing crops is a matter of long-term care and demands awareness of consequences and planning. Prehistoric men, on the other hand, brought the mammoth meat in by acting in the moment and not by worrying about the long-term effects this may have.

On the flip side, women take longer to reach a decision and may miss some great opportunities.

3. They Listen to Opinion and Advice

Studies consistently find women are twice as likely as men to discuss their investment decisions with friends, family and investing professionals. This is often interpreted as lack of confidence and interpreted negatively.

I believe that discussing investment decisions and soliciting variety of opinions is a very powerful tool for investment success.

This is also something that comes naturally to women; personally, I like discussing almost everything with others. This helps me see and assess different viewpoints, some of which I would have missed otherwise.

4. They Invest for Life Rather Than Live to Invest

My experience and observations are that women invest for life events. In this sense, investing is a means to an end rather than the end itself.

Women generally need a big dream to focus their effort: they understand that the benefits investing yields are to nourish not to get carried away with the game.

In Summary:

Investing women rock because they combine the knowledge of a researcher, the strategic thinking of a great military commander and the determination, and the patience of a hunter. They nourish and grow their portfolios with the evolutionary skills that have served them for an age.

If you are a female looking to invest, you can rock as well. You have the key competencies. You may just need to get yourself a “red carpet dream” and educate yourself about opportunities.

Maria Nedeva, the blogger behind The Money Principle, shows smart people how to win the game of wealth by learning and acting. Her brand of money management comes with a side dish of logic, analysis and sociology.

Image by Natesh Ramasamy



Last Edited: July 29, 2014 @ 12:00 am

Comments

  1. RFIndependence says:

    I had never heard women fared better with investing but for the reasons you mentionned that makes sense. I do quite a bit of research, although I almost never listen to anyone, or at least I am hard to convince and always feel like I am the one making the decision in the end.

  2. Thanks for posting this. I’m female, 30, and have saved/invested over $250,000. I wish it was more PC to talk about this publicly because I feel way too many people in their 20s, especially women, feel like somehow the money situation will work itself out later in life. Women may in the back of their minds assume that they will marry a man who will figure things out. I grew up with a stay-at-home mom and working dad who managed all the money, so had to figure this out on my own. I think I’m better at investing than some men because I don’t take as many risks. I’ve taken some, for sure, but nothing too crazy. I wish more women would realize that they need to be responsible for their own retirements!

  3. In my (admittedly limited) experience, women tend to be more conservative, while men tend to embrace riskiness more. In the good times the riskier investments always look better, but at the end of the bloodletting of a downturn, the conservative portfolios end up looking better. Me, I’m of the conservative persuasion..Guess you could say I’m in touch with my feminine side :)

  4. maria@moneyprinciple says:

    RFIndependenceHa, ha! This is what people don’t realise about us women. When we talk to people about what we want to do and ask for opinion, people think it is a sign of insecurity and weakness. I always talk to many people about key actions I take; then I make my mind up and do exactly what I want to do :).

  5. maria@moneyprinciple says:

    hereverycentcountsWell done and well said. What I think? I believe that both men and women will be better off if we share more responsibilities – for making money and looking after kids, homes etc. My husband and I have always done this and as a result our bank balance is healthy and our sons are growing up well adjusted and good people. Women who think that marriage is a ticket to financial health are demeaning themselves and their partners.

  6. maria@moneyprinciple says:

    William_Drop_Dead_MoneyWilliam, glad to hear that you are in touch with your feminine side :). After all, Buffet reputedly invests like a girl. It is also true that conservatism fairs well in tough times  works for individuals as well as whole coutries.

  7. My wife would be a better investor than I am, but that is simply not her interest.  She is more patient, analytical and truly has a better business mind than I do.  I think there are plenty of women who excel at it, maybe they just do get the notoriety.

  8. barbfriedberg says:

    Maria, As a 30 year investor, portfolio manager, and university investments instructor, I can state that your article is right on track. The research is clear, women are equal to or superior to men as investors. I posit that lack of exposure and fear contribute to the paucity of women investors. Thanks for a well researched article calling out this important issue.

  9. maria@moneyprinciple says:

    @JimJim, any chance you could get your wife interested? How about creating a ‘dream’ together? If she gets fired up enough about the dream, she may start investing. Also, reputendly, leaving around reading on investing helps – women ignore it for sometime, then read a bit, then more…and bimgo: their interest has peaked.

  10. maria@moneyprinciple says:

    barbfriedbergThanks for your comment, Barb: it means a lot. Question is, how do we change this situation; how do we nurture more women to invest? Because there is a lot of mythology about investing women out there. One thing most media is getting wrong is our propensity to discuss our option with anyone prepared to listen is interpreted as insecurity. I don’t believe it is; women tend to discuss a lot, ask for opinion but then the decision is usually theirs.

  11. barbfriedberg
    In my eye women are very good analyser in financial matter. Women
    do more homework because they know about their confident level. They want to be
    in control, and therefore do more research to find out exactly what they are
    investing in. Women also have more realistic ideas about what an investment can
    reasonably deliver. In short, they have lower expectations. Therefore, they are
    less likely to jump on the “next big thing” or fall for a “can’t miss” stock
    tip. They are not that much competitive as men are in the investing sectors. In
    so many areas of investing sector competition is not right. Thirdly, It’s true
    that before doing anything women ask thousand times for getting better
    suggestion where men are less likely to ask for advice. Women take fewer risks.
    So it should come as no surprise that women gravitate toward safer investments
    and hold stock portfolios that are less volatile. Women look out for the next storm.
    When it arrives they batten down the hatches and ride it out. They know the
    market is like the ocean. It is much bigger than any one investor, subject to
    huge global forces. But over time there’s a certain ebb and flow, and if you’re
    a good navigator you can sail on to richer shores.

  12. maria@moneyprinciple says:

    James@Finance Education There, there, James. A very good re-cap of wome’s strengths as investors. I still think that women ask for opinion so much because this is how we do things; we discuss and always have done. At the end of it a woman will do exactly what she has decided to do.

  13. maria@moneyprinciple James@Finance EducationActually what I observed in most of  women that they always like to do any work systematically with patience for getting best result not for themselves but for their kids or others benefit in most of cases. These are their quality and this quality also applicable for getting best result in investing sector.