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.
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.
Frequently Asked Questions about this Article…
Research from Fidelity Investments shows that women save 8.3% of their salary on average, compared to 7.9% for men. This difference, though seemingly small, can lead to tens of thousands of dollars in additional savings over a career, especially when compounded over time.
Women generally exhibit a lower tendency towards overconfidence and are more risk-averse than men. These traits contribute to more consistent and less extreme investment styles, which can be beneficial in the long run.
Being more risk-averse, women tend to trade less and avoid extreme investment decisions. This cautious approach helps in maintaining a stable investment strategy, which can lead to better performance over time.
Yes, studies have shown that women outperform men by 1.4% annually. Despite men being more confident in their investing abilities, women's cautious and consistent approach often yields better results.
According to a study by Betterment, female investors change their asset allocations 20% less frequently than men. This stability in investment strategy can contribute to better long-term performance.
Men are more likely to embrace competition and exhibit overconfidence, which can lead to erratic investment behaviors such as making massive asset allocation changes. This can negatively impact their investment performance.
Women log into their investment accounts 45% less often than men, which may help them avoid making impulsive decisions based on short-term market fluctuations, leading to more stable investment outcomes.
Everyday investors can benefit from adopting a more cautious and consistent investment approach, similar to women. This includes saving more, trading less, and avoiding drastic changes in asset allocation, which can lead to better long-term investment performance.
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