If you want to get rich, invest like a woman

Men throw better than women – it’s a fact. Research at the University of Wisconsin demonstrated it conclusively. But, while men can hold their heads high with that study in mind, they might want to take their egos down a notch when it comes to investing: sorry gents, women do it better. A growing body of academic research has found women outperform men at investing. Here's how they do it.

Men throw better than women – it’s a fact. Research at the University of Wisconsin demonstrated it conclusively. But, while men can hold their heads high with that study in mind, they might want to take their egos down a notch when it comes to investing: sorry gents, women do it better. 

For starters, women save more. Research from Fidelity Investments found that while men save 7.9% of their salary on average, women put away 8.3%. That may not sound like much, but the difference equates to tens of thousands of dollars in additional savings over a career with the added bonus of compound interest. 

Women are wired with other psychological advantages, such as a lower tendency towards overconfidence than men. Women also tend to be more risk averse. Female fund managers, in particular, trade less and also follow more consistent, less extreme investment styles.

Furthermore, research has found that women are more averse to competition. Men, on the other hand, embrace competition – even if they only have a remote chance at winning.

Finally, a study of 60,000 investors by robo-advisor Betterment found that female customers changed their asset allocations 20% less frequently than men and logged into their accounts 45% less often. More alarming, males were nearly six times as likely to indulge in massive asset allocation changes and ‘erratic behaviour’ – say, shifting 100% of their portfolio out of stocks and into bonds or vice versa.

How does all this impact performance? While men were significantly more likely to believe they would outperform, a study of brokerage statements from 35,000 households found that women outperformed their male counterparts by 1.4% a year. If you refuse to throw like a girl, at least consider investing like one.

 

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