In the cut-throat world of investing, one must have their wits about them and be extremely calculated in weighing the risks versus the rewards.
Women do this better than men, according to the investment research head of FNB Wealth and Investments, Chantal Marx.
Marx points to a variety of research that discovered this. This includes a recent 10-year review of five million Fidelity accounts which revealed that US women’s returns were 0.4% greater than men’s.
This disparity is even more pronounced, according to a Berkeley research, which found that women’s returns were nearly one percent greater.
“A study by Hargreaves Lansdown, the UK’s biggest consumer investment platform, found that women investors returned on average 0.81% more than men over a three-year period.
It may not sound like much, but Hargreaves points out that if this pattern were to continue for 30 years, the average woman would end up with a portfolio worth 25% more than the average man,” says Marx.
According to Marx, the following are some essential features that women seem to have that may account for their out-performance in the market:
Women are more risk-conscious
Based on a BlackRock poll, 72% of women avoided “riskier” shares, bonds, or real estate, compared to 59% of men.
A more deliberate, methodical, and less impulsive approach to investing yields greater long-term profits. This also indicates that, in addition to outperforming males in absolute terms, women have a substantially greater “risk adjusted return” than men.
Women leave their investments alone
High amounts of trading tend to reduce returns, and women alter their portfolios less frequently than males. According to the Warwick study, female investors trade nine times each year on average, whereas males trade 13 times.
Many people are surprised to hear that women are less emotional about money than males. As a result, they avoid rash decisions and remain calmer during moments of market turbulence.
Nationwide Financial Services estimated that during instances of market turmoil, 15% of men would sell their holdings, compared to eight percent of their female clients. Selling your investments when markets are plunging is a bad idea since huge drops are nearly always transient, and markets have always rebounded after major shocks.
Women are better at letting go when they should
Loss aversion is a significant emotional bias that hinders investment success. According to a new study published in the Journal of Risk and Uncertainty, males are more risk averse than women. This means that males are more prone than women to hang on to their “losers” in the hopes of a change of fortune.
Women are less sure of themselves when it comes to financial decisions
According to a 2020 research conducted by George Washington University's Global Financial Literacy Excellence Centre, women are less confident investors.
In particular, 54% of women polled in their study self-identify as having a high degree of investing expertise, compared to 71% of males, and 34% feel comfortable making investment decisions, compared to 49% of men surveyed.
Overconfidence is a significant emotional bias that impedes investing performance. Being less certain may necessitate extra investigation into purchasing and selling decisions.
There is some evidence that women are less likely to hop on investing fads/trends
Gallup Analytics discovered that in 2021, 11% of US male investors held Bitcoin, compared to three percent of female investors. Furthermore, during the meme-stock craze of early 2021, Hargreaves discovered that transactions in companies like GameStop and AMC Entertainment were dominated by men, with 86% of orders on these stocks made by men.
This might imply that women are less prone than males to experience FOMO (another emotional reaction) while making investing decisions.
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