Ep8: Are women better investors or should they leave it to men?

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Women and Investing

According to a research report by Fidelity Investments, women seem to be better savers than men. Their study showed that while men save 7.9% of their salaries, women save 8.3%. Over time, this small difference has a big impact on potential wealth accumulation.

The report also suggests that women are better investors as well. Terrance Odean and Brad Barber, who conducted the research, found “that women outperform men annually by about one percentage point.” According to them, one possible reason for this is that “women are less inclined to check their portfolios… and they change their asset allocation less frequently than male investors.” “When women do invest, they do better,” says Kathleen Murphy of President of Fidelity Personal Investing. “But too many women don’t.”

From our experience observing female investors, seem less emotionally involved in the investment decision process than men. For male investors, investing seems to be a matter of pride and personal self-esteem. They see it as a competitive game where making prudent investment decisions is secondary, but beating their peers is a priority. Their over-competitiveness leads them to take higher risks and lower their guard for smooth talking advisors that usually ends in purely speculative bets.

Female investors seem to have a failsafe system embedded in their decision-making when it comes to managing their household money. They tend to follow their risk-averse instincts much more often than their male counterparts. Combined with the previously mentioned factors, women, on average, make better investors.

However, women are not free of cognitive biases. In future episodes, we will discuss the issue of investing related to gender, and we will investigate why there are fewer female (retail or professional) than male investors.

MENTIONED IN THIS EPISODE

• Japan offers an interesting case study. In Japan, where homemakers traditionally manage the family’s budget, Japanese have, on average, done very well for themselves financially.

LINKS:

• Study on gender-related investing