In my workshops, webinars and my client base I have consistently, over many years just about 85 % men and only 15 % women as clients. This figure has been quite stable over the last 20 years or so. We could argue why only a small percentage of women trade / invest but today I want to discuss who is the better investor: Women or men? (And I am a man so I am obviously biased but I’ll try hard to be objective.)
For starters, women save more. Research from US based Fidelity Investments using US data found that men save 7.9 % of their salary on average whereas women put away 8.3 %. This does not sound much of a difference, but over an investment career of a few decades the savings difference will add up to thousands of dollars of additional savings thanks to the magic of compound interest.
Women are not testosterone driven like men (obviously) and as such have a lower tendency towards overconfidence. Women tend to be more risk averse, more conservative in their investments. Female fund managers tend to trade less and follow more consistent, less extreme investment style. Women tend to be averse to competition and won’t participate in investments with a remote chance of winning even a large amount. Men, more often than not, have more of an ego involved in trading and investing and very often tend to “shoot for the moon” with higher risk – higher reward trades, often being more likely to use leverage.
Finally, a study of 60,000 investors by robo-advisor Betterment found that female customers changed their asset allocations 20% less frequently than men and logged into their accounts 45% less often. More alarming, males were nearly six times as likely to indulge in massive asset allocation changes and ‘erratic behaviour’ – say, shifting 100% of their portfolio out of stocks and into bonds or vice versa.
With all this in mind, men are significantly more likely to believe they can outperform the market. However, women tend to outperform their male counterparts by 1.4 % point p.a. as a study of brokerage statements from 35,000 households found.
So what can we men learn from women? Gamble less; take less risk, less ego involvement in trading, less overconfidence, less erratic change in asset allocation. And on top of that: Get your wife involved in investing and trading. She may not like it at the beginning but once she gets the hang of it will moderate the husband’s investment style. A blend of the ying and yang, of male and female (although women can drive us nuts….) is beneficial in many areas of life but will probably lead to more consistent investment results. And on top of that she can’t blame you if some of your trades don’t work out – after all it was a joint decision!