Kids should know. Adding the phrase “like a girl” to the end of whatever you were saying was a put-down, an insult, something to come to fisticuffs over. Little boys the world over hated being told that they, for example, “threw like a girl.” The intent isn’t necessarily right – as members of the fairer sex would likely agree with – but hey, that’s been the case from the playground on up. When it comes to investing, though, you could do a whole lot worse than learning to “invest like a girl.” And that’s why Warren Buffett, chairman…
Kids should know. Adding the phrase “like a girl” to the end of whatever you were saying was a put-down, an insult, something to come to fisticuffs over. Little boys the world over hated being told that they, for example, “threw like a girl.” The intent isn’t necessarily right – as members of the fairer sex would likely agree with – but hey, that’s been the case from the playground on up.
When it comes to investing, though, you could do a whole lot worse than learning to “invest like a girl.” And that’s why Warren Buffett, chairman and CEO of the giant American conglomerate and investment holding company Berkshire Hathaway, very likely wouldn’t get offended with that tag on him. In fact, he’s even a very big part of The Motley Fool’s 2011 book Warren Buffett Invests Like a Girl: And Why You Should, Too, written by Fool.com contributor LouAnn Lofton!
What makes Buffett Buffett
What is it that makes Warren Buffett such a consistently phenomenal investor? Is it that he’s zigging and zagging along with the market’s every move? Is he trading all the time, buying this and selling that, racking up taxes and commissions all the while? Is he moving into and out of the markets in a testosterone-fueled frenzy?
No, no, and no — what makes Warren Buffett the investor whom every investor wants to be like is that he approaches investing differently from the way most men do. Buffett has famously said that temperament is more important when it comes to investing success than is intellect. And his temperament tends to be more feminine than masculine.
He’s patient and does thorough research. He doesn’t buy the latest whiz-bang technology company that he can’t understand. He doesn’t take excessive risks. His goal is to never sell the companies he invests in. He doesn’t do something just to do something. He’s the anti-trader, if you will.
Yep, we’ll say it again – Warren Buffett invests like a girl. And that’s a very good thing.
Women and investing
So how exactly do women invest? Check out just a few of the characteristics of female investors that distinguish them from their male counterparts:
1) More time on research: Women spend more time researching their investment choices and tend to take less risk than men do. This prevents them from chasing “hot” tips and trading on whims — behavior that tends to weaken men’s portfolios. Women are also more likely to seek out information that challenges their assumptions, rather than only relying on data that confirms what they already thought.
2) Less Trading: One study found that men trade 45% more often than women do, and although men are more confident investors, they tend to be overconfident. By trading more often — and without enough research — men reduce their net returns. But by trading less, women produce better returns and also save on transaction costs and capital gains taxes.
3) Lesser risk-taking: Women have less testosterone than men do (not a surprise, we know). New and continually unfolding science points to the possibility that testosterone is responsible for herd-like risk-taking behavior from men in the financial markets. That makes a lack of it a decided asset.
These are just some of the traits that make female investors more like Buffett and less like frazzled, frenetic day traders, with their ties askew, hair on end, and eyes bleary. Patience and good decision-making help set women apart here. (There are others, naturally, which are also covered in Warren Buffett Invests Like a Girl: And Why You Should, Too.)
So what if you’re not a girl?
It’s possible, dear reader, that you’re of the male persuasion, but don’t fret. By focusing on the traits that created superinvestor Warren Buffett’s exemplary temperament — patience, the willingness to dig deep, and the desire to buy and hold instead of trade, trade, trade — you can awaken the feminine side of your investment psyche.
And in case you’re wondering, it’s not only in America where patience and a long time horizon works. In Singapore, a great example would be how the Straits Times Index (SGX: ^STI) has historically lowered the odds of making losses for an investor the longer one holds on to it.
So, consider investing like a girl. Your portfolio might just thank you for it.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. This article was written by LouAnn Lofton and first published on fool.com. It has been edited for fool.sg.