Men take up a lot of space when it comes to stock investing, but women are better investors.
Men are equity analysts, equity experts, shareholders, board chairmen, CEOs and financial experts. Men debate in posts and make up 90% of participants in most stock-related social media groups.
But when it comes to generating returns, women actually do better than men.
This has been illustrated by several studies, including, among others, those of Cal-Berkley, Warwick Business School and Fidelity. If you want to dive deeper into the data, I’m sure you can get Google to show you.
Here I’ll suggest some possible reasons as to why women are better investors than men.
Reason 1: Women Are Risk-averse
Women are very aware that they can lose money on stocks.
They think twice before investing, and they tend to choose companies that they recognize from their own lives, companies with products that they know are good, solid products. They invest in things they like.
Some men tend to have a lottery-like mindset when it comes to stock investing. By that I mean they tend to choose stocks that they believe have a potential to skyrocket – but not necessarily with a sound product in the real world. This could be a biotech company with no revenue but some exciting research and potential medicine in the pipeline.
Reason 2: Women “Forget” About Their Investment
Women make a decision, invest and then move on in life and “forget” to check the share price.
This means that they do not suffer as much from an overactive trigger finger, where they constantly check the share price and act irrationally based on how the price has changed that day.
Studies have shown that women buy stocks nine times a year, while men make new investments 13 times a year (Warwick study).
Reason 3: Women Do the Homework
Because women are a bit more aware of risk, they also hesitate more and spend more time familiarizing themselves with a company before investing in it.
They take some time to learn how to invest in the stock market in general, whereas men tend to toss away the instruction manual and just start by fiddling with the buttons on the platform to see what happens.
This can be both a strength and a disadvantage. Women must be careful that they don’t put off action for too long and never get started.
Reason 4: Women Are Patient
Sometimes it takes time for a stock to start showing results. Women have that patience. They don’t lose heart with a company because the stock hasn’t skyrocketed after a few weeks.
Perhaps it’s linked to the fact that women biologically wait nine months to have a child. We know that good things take time and grow slowly.
Reason 5: Women Accept a Loss and Move On
When shares in a company dive for reasons that reflect some fundamental problems in the company, you can react in three different ways:
1. You can either slam the laptop shut and forget about it (do nothing).
2. You can accept the loss immediately, sell the share and invest the money in something else.
3. Or you can dig yourself further into a hole by buying more stocks in the hope that they will turn around one day. The logic here is that you get a lower average price.
Women are good at taking the loss right away and moving on in life.
This means that they can make a good return elsewhere and that they recover faster from the loss.
On the other hand, if you throw more money at a bad investment because you find it difficult to accept defeat, you can really dig yourself a hole that is difficult to get out of.
I once met an elderly man who had blown his entire pension on a bad investment because he stubbornly kept believing that it would turn around and couldn’t accept that he had been wrong in the first place.
Start Value Investing
These qualities make women particularly good value investors.
They are very good at thinking long-term and buying stocks based on real-world rationale, judging the company’s products as a consumer. Women also patiently wait for better times when the market goes against them. At the same time, they admit it and course-correct if they realize they’ve made a mistake.
To learn more about investing this way, download my free e-book here.