Research Shows Women are Better Investors
A quick look at Wallstreet will have you convinced that men are better investors than women. The same applies when you have a peek at big banks.
Estimates show that about 84% of individuals licensed to give financial advice are males. This means that only a paltry 5,000 females are to be found in the industry out of the 31,000 individuals plying the trade.
Surprisingly, even with their dominance well announced in financial circles, the truth on the ground is that males are generally not better at investing.
The prime reason for this? Emotions. When caught in a fix that requires problem-solving, many males tend to lack the necessary focus in making the right choices. This overreliance on their emotional side means that males run higher risks.
One study conducted by the Warwick Business School affirms this position. In their analysis, they reviewed the habits of investors who are trading their shares and monies while on the Barclay’s Smart Investor platform.
On the flip side, women performed exceptionally better than their male counterparts. The data recorded showed that annually, female investors goat a mean annual gain which was considerably better than the FTSE at 1.94 percent. To really get the gist of things, you need to compound the difference between males and their female counterparts.
Obviously, there some flaws in the way men went about their business. In the study, the researchers concluded that men were more susceptible to the thrill of a fantasy. Therefore, they pegged a lot of their investments on speculative shares in the hopes of making mammoth returns. Many men staked their hopes on considerably cheap instruments which had the promise of producing lottery-sized amounts.
In the case of Geraldine Weiss, the optics are a little bit different. Despite being one of the most successful entrepreneurs in the world today, she’s virtually unknown to the general public.
As Weiss shared, she started her trade in 1966 under the moniker “G. Weiss”. Smartly, she did so so that readers would not judge her because of her gender. By using a pen name, she discovered that she was able to land more opportunities and become revered in close circles.
Even with her strong credentials, with a degree from the University of California, plus her tremendous work ethic, she recalls that many employers simply looked the other way when she applied for positions. At best, many brokerage firms offered her opportunities no better than a secretarial position.
Weiss added that the culture back then heavily favored male enterprise. As such, many openings that arose expected to bring aboard a male professional. Many ladies simply didn’t try out opportunities because of this. She opined that her refusal to conform to societal rules was the sole reason she made it big.
Data from a Cal-Berkeley study looking to investigate the differences between men and women, clearly shows that men are beaten by women in virtually all aspects of investment when the averages were compiled.
With their study running from February 1991-January 1997, they discovered that women fared better by about 0.94% per year, compared to their male counterparts. At the same time, the study showed that men were more likely to trade, by about 45% than women.
Findings from the studies conducted all have a common denominator, men were more likely to misjudge situations because of their naturally overzealous tendencies. This false sense of confidence opens up men to the danger of mismanaging portfolios.
Funnily, the studies showed that many men in such positions tended to believe they were firmly in control before they lost the plot. While confidence in the markets is an admirable quality, it may dilute a good performance one factors like increased number of transactions and over-trading come into play.
As is always the case, momentum swings usually happen. This is where the wheat gets separated from the chaff. While wise investors rush to make a killing or simply hold back from buying or selling a stock, overconfident chaps usually misread situations. They may buy more when there’s a boon in business in order to make maximum returns or sell more during offseason in order to avert losses.
However, as many analysts have echoed, buying and selling isn’t a business that needs to be compelled by a “feeling”. Instead, the decision on whether to buy or sell needs to be well thought up and marked to prevent subpar results.
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