Despite there being fewer women in the stock market, research has shown women outperform men when it comes to investing. Studies found only 45% of women invest compared to 63% of men, yet women achieve 1.8% higher returns over a three year average compared to their male counterparts. So why do female investors have an edge?
Hargreaves Lansdown found women have an edge, finding women had an average return 0.81% higher than men over three years. If this was compounded over 30 years, an average woman’s portfolio would be 25% greater than the average man. A study by Warwick Business School tracked the performance of investors over three years to find women outperformed the FTSE 100 and received much higher returns than men. Where men only achieved an average 0.14% higher than the FTSE 100, women achieved an annual average return of 1.94% greater than the FTSE 100.
Why do women tend to invest less?
Women are less likely to invest in the stock market, which isn’t a huge surprise in this male-dominated industry. This might be due to a lack of role models as there are much fewer high-profile female investors than men. Ever heard Geraldine Weiss? She is one of the world’s most successful traders yet does not nearly get as much press coverage as her male counterparts. Weiss hid her gender for decades to get an even standpoint for investing. How did she do so well? She kept her cool and never let emotions or overconfidence affect her decisions. Everyone has the potential to carry these features to trade successfully, however, women naturally hold a greater tendency towards these traits.
How do women tend to invest?
Women tend to prioritize cash savings over stocks and share investments, a study by YouGov found 55% of women have never invested compared to only 37% of men. Women tend to make less risky financial decisions as there is a greater fear of loss. Women tend to stay away from making money quickly and opt for the slow but less risky road to achieving profits. A study by Warwick University found women tend to invest in funds that produce consistent profit over volatile individual investments. This way the investment is diversified and the risk is spread across a number of companies, reducing losses. While it might seem playing it safe shouldn’t reach greater rewards, there is a much greater guarantee of profit. Men tend to be overconfident and are more likely to buy more on a high and sell more in losses, based on their greater affinity for impulsive behavior. Furthermore, women tend to trade less frequently than men, Hargreaves Lansdown found women traded funds 67% less than men, suggesting women have a much longer term eye for investment. This outlook means trading costs and transaction commissions are dramatically reduced for women, who tend to invest more conservatively.
Why should women invest?
It is important for women to at least be aware they can achieve financial equality and independence, as historically, especially in some cultures, women are dependent on male family members or partners. In the face of change, investing is one of the ways women can match or exceed the potential of male counterparts to gain wealth. Having a well-balanced savings and investment portfolio is crucial to ensuring one’s personal and family’s well being. A long term goal like a house, wedding or starting a family can be achieved by investing the right way. Holding cash in a bank with low interest rates will hold you back from achieving your goals, whereas investing in a fund will gain profit higher than a regular savings account and push you further.
Women are in the minority when it comes to investing and there are countless reasons for this. But that doesn’t mean they can’t invest and achieve profits the same as men, or better. Investing in your future is essential for everyone, whatever gender. Start your trading journey with BullBear.