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

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