What better way to celebrate International Women’s Day than to showcase why women are awesome, right? 😉 While investment is usually regarded as a predominantly masculine activity, recently more and more women are looking to investment to complement their careers, generate passive income, and generally help them prepare for the future. So here are 7 (lucky) reasons why women make better investors than men:
#1 Women are not afraid to ask
You know the stereotype about women asking for directions and men refusing to ask even when they’re lost? Well, it looks like the same theory applies when it comes to investing. Women are not afraid to say ‘I don’t know’ when they do not understand something, and they are willing to ask questions to get answers and explanations when they are unsure. This will not only enable them to learn something new, it also helps save time trying to figure out something on their own.
#2 Women trade less aggressively and are risk-averse
A study by Barclays Wealth and Ledbury Research found that women were more likely to make money in the market because they take fewer risks. They will put more effort to do research and homework before placing their money into an investment. “They buy and hold because they are not as confident or overconfident as men. As such, they trade less and earn more.” Being risk averse certainly helps women. They have a more diversified portfolio and shy away from high risk investments.
#3 Women are more patient and have long-term focus
Women have more patience. They recognise that you don’t need to monitor the performance of your stocks every day, as this only increases the risk of knee-jerk reactions to minor fluctuations in the market. They focus on the long-term benefits of investing, more likely to remain steady under pressure, and are better able to look beyond the current crisis and recognise that all markets rise in value eventually.
#4 Women are not overconfident
To be a successful investor you need to trade very little, and adopt a “don’t bite off more than you can chew” approach. The massive amount of trading the stock markets sees is mostly due to overconfidence. In general, people are overconfident about their skills and knowledge, but men more so than women. A 2015 survey by SigFig, a US investment management company, found that male investors had higher expectations to beat the market than women, but female investors were the ones who were more likely to actually beat the market than men.
#5 Women are less competitive
Men are seen as more competitive because they want to beat their rivals and win trades so that they can boast about it. This ego-driven approach is a problem because it causes them to take inappropriate risks in the hope of winning. Women, however, are less driven by competition, preferring to focus on reaching their financial goals – which is also a form of ‘winning’.
#6 Women are less emotionally attached
Wait, before you jump on me for this particular point – in this case, women are less emotionally attached to their investments. Men are usually regarded as more egoistic, and don’t want to admit that they are wrong. They will hold on to their losses a lot longer than women, as they are sure that their investment will provide returns (even when there is very little hope that it will). Women, on the other hand, are less emotionally-attached, more loss-averse and are far quicker to unload investments that are on the losing end.
#7 Men get angry; women become cautious
Anger can cloud your judgement, leading to more mistakes and higher losses. More often than not, when things go wrong, men get angry while women become more cautious and fearful. A study done by the University of Oregon into investors’ reaction to a fall in the US stock market in 2009, found that men had responded angrily and traded aggressively in an attempt to recoup their losses, which only resulted in more losses. Women on the other hand, reacted to the down market with fear. Their fear caused them to pull back and hold tight for a while. They avoided making hasty decisions and became more cautious.
From the points above, we can see that women and men have rather different ways and approaches to investing. Regardless of which ‘type’ of investor you are, it is always wise to exercise caution, and be confident of your choices (but not overconfident) when backed by solid information and research. After all, some may say that the risk of investing is what makes it so enjoyable and rewarding when done right.
Unfortunately, while women may be better investors than men, there are still very much less women than men when it comes to investments. It’s time to educate our fellow ladies in the ways of and encourage them to explore more avenues to generate income!