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Sorry Guys, Women Are Crushing It: Why Women Make Better Investors

Published -
May 2, 2024

Decades of stereotypes have painted women as financially timid, leaving the investing arena to men. But research suggests a different reality: women have quietly emerged as superior investors.

Going back to a study done in the 1990s titled Boys Will be Boys: Gender, Overconfidence, and Common Stock Investment, Brad Barber and Terry Odean concluded that men underperform women by almost one percentage point per year. Making matters more interesting, they found the gap between single men and single women was even wider at 1.44 percentage points per year. It seems that even the presence of a lady in a man’s life will make him a better investor!

A 17-year Finnish study completed in 2016 found “significant and remarkable gain made by female investors at the expense of male investors.” Wow.

A 2021 Fidelity study across 5.2 million accounts concluded that women outpaced men when it came to investing. The study found women traded half as much as their male counterparts. Less trading means lower costs and fewer emotional reactions to the market-both return killers.

So why is it that women seem to be superior investors? From the research mentioned above, along with our own observations, here are the factors that play into this:

Long-Term Visionaries: Forget chasing the next hot stock. Women tend to prioritize long-term goals, taking a measured approach that values steady growth over risky bets. This focus translates into less impulsive decisions and a commitment to a well-defined investment plan.

Risk Realists: Let's face it, a cool head prevails in the market. Studies show women tend to be more risk-aware, opting for a balanced portfolio over aggressive stock picking or fad chasing.

Trading Tamely: Frequent trading based on emotion often leads to higher costs and missed opportunities. Women, on average, trade less often than men. This "buy and hold" mentality allows them to ride out market fluctuations and benefit from long-term growth.

Collaboration is Key: Just like asking for directions (pre-GPS), women are more likely to seek help. This willingness to learn and leverage expertise from professionals can significantly improve investment outcomes.

The Power of Patience: Building wealth takes time. Women tend to be more patient investors, understanding that significant returns come with a long-term commitment. This focus on the marathon, not the sprint, is a recipe for financial success.

Humility vs. Overconfidence: Too many men are plagued with overconfidence. Although this trait may have helped them in their professional careers, it has proven to be a liability in the investment arena. Humility on the other hand, means freedom from the overconfidence that clouds judgement and leads to poor decisions.

The Performance Gap is Significant

Starting at $100,000 with women earning 8% and men earning 7%

It's Not About Gender: Of course, this isn't about pitting genders against one another. The key takeaway is that successful investing hinges on specific behaviors, not chromosomes. Anyone can cultivate the characteristics that lead to financial success: patience, prudence, knowing when to seek help, and a long-term vision.

So guys, it may be a wise move to listen to the ladies in your life when it comes to investing. The irony is, she probably isn’t saying much about it.

How can we help you?

We’re happy to answer any questions you may have about financial, retirement or tax planning. We also love to talk about investment management and how our process increases the odds of our clients meeting or exceeding their goals.

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