Let’s Face It. Women Are Better Investors than Men

Try telling your male friends this: “The Straits Times Index (SGX: ^STI) ended last week with a weekly gain of 1.2%. I think I know where it’d head to next!” Then, try it with your female friends. I can’t know for sure, but I think the level of interest between both groups of friends would be very different when it comes to the topic.

After all (and I’m certainly not trying to make any statements with a sexist connotation), it’s just an anecdotal observation of mine (I’m male, by the way) that the level of relative interest that men have for investing as compared to women, is similar to the relative interest that women have for shopping over what men have.

However, with many ladies now being financially independent too without depending on their spouses for income, it seems important for them to gain knowledge on how to beat inflation through investing.

Just like how each individual would have different levels of risk tolerance, the biological differences between men and women would also hold great implications in terms of the differences in their investing behavior and the methods applied. In fact, past surveys and studies conducted by major exchange markets and banks have shown that male and female investors’ mentalities work to a completely different tuning.

Here are some ways in which men and women differ when it comes to investing.

1. Risk averseness

Generally speaking, women tend to prefer more security in financial matters while a man would gladly go for the thrill of higher (and riskier) returns any day. This is linked to the different levels of testosterone that men and women have in their bodies; the chemical, which is found in higher levels in men, is responsible for herd-like risk-taking behaviour found in the financial markets. This risk-taking behaviour is also incidentally, often the cause of downfalls for male investors.

As men in general prefer to take on higher risks like chasing after “hot” tips and trading on whims and fancies, we tend to rake in lower returns as compared to the opposite sex. It’s also really interesting to note here that despite famous investors like Warren Buffett and Peter Lynch being male, their investing behaviour is distinctly female-like – they tend to buy and hold shares at discounted prices for the long-term.

2. Patience

If you go back all the way in time to pre-history, when mankind first evolved, men were generally the ones who hunted in the wild for food while the women stayed at ‘home’ to take care of domestic matters. Fast forward to the modern era, we men are still susceptible to wanting action all the time (hunting after all, can be a frenetic and furious activity; it’s most certainly the antithesis of the word ‘sedentary’). That probably explains why, despite the dangers associated with them, leveraged products like forex and commodities trading still manage to tempt men – these financial instruments require constant action in terms of monitoring and executing trades.

In contrast, women are more patient and prefer to take the long view even if it means they might secure what seem to be lower returns. But of course, it’s been shown that it is taking the long view and investing for the long-term that helps stack the odds of success in investors’ favour. So in that respect, it’s us men – with our need for action and lack of patience – who loses out.

3. Confidence

Men tend to be more egoistic when it comes to investing as we often assume that we are right in our analysis even when it is not the case. In other words, we’re often overconfident of our own investing ability..

Women, on the other hand, claim to know less and seem to be shrouded in uncertainty. Thus, they will usually put in more effort into their research, which can lead to better investment choices than men because of the level of thought put into each investment idea.

Foolish Bottomline

By now, I think it’s pretty clear that women actually make for better investors than men, which makes it all the more unfortunate that women don’t seem to be as interested in the financial markets as men do. For men, there’s no real need to despair as there are many avenues which detail how we can embrace a more “feminine” investing style and improve our results – the book “Warren Buffett Invests Like a Girl: And Why You Should, Too” is one such example.

Perhaps, it’s time for female investors to make use of their inherent advantages and start building wealth in the share market. According to statistics compiled by the website, only 12% of women who responded would invest in shares as compared to 21% of males who would do the same. Who knows, with gender equality and rising incomes, there may be many more successful female investors mentioned in the media in time to come.

Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.  

The Motley Fool’s purpose is to help the world invest, better. Like us on Facebook  to keep up-to-date with our latest news and articles.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.