4 Ways Women Are Better Investors Than Men

Women often make smarter investment choices than men and earn higher returns.

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4 Ways Women Are Better Investors Than Men
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By Tom Sightings

The evidence is in: According to a number of studies from banks and investment firms over the past decade, women make better investors than men. The most recent, from the tax and advisory firm Rothstein Kass, found that hedge funds run by by women outperformed those managed by men by 6 percentage points over a nine-month period in 2012.

Why do women, on average, do better? No one knows for sure. And, of course, there are plenty of exceptions like Warren Buffett. But when tallied over the long term, women generally produce better investment returns than men. There are four likely reasons:

1. Men are more competitive. You'd think this would be a good thing, right? But as in so many areas of investing, the obvious answer is not the right answer. For many men, the most important thing is not the absolute return of an investment, but whether or not they beat their rivals. This often leads male managers to make riskier bets, which are less likely to pay off.

The second most important investment criteria for many men is bragging about their returns. And as we all know, men are less likely to ask for advice. Somehow it's seen as a mark of weakness. All this leads men to focus on the short term and lose sight of the real objective of investing: producing consistent, positive returns over an extended period of time.

2. Women take fewer risks. According to research by behavioral scientists, women as a rule are more risk-averse than men. Women are more inclined than men to wear seat belts, avoid cigarette smoking and get their blood pressure checked. They are 40 percent less likely to run yellow traffic lights. So it should come as no surprise that women gravitate toward safer investments and hold stock portfolios that are less volatile.

One investment study concluded that when things go wrong, men get angry, while women become more fearful. Anger can lead people to take action that will lead to more losses, such as doubling down on losing investments or trying to "catch a falling knife."
By contrast, fearful women are more likely to avoid market downturns in the first place, and then if they do suffer losses they are more likely pull in the reins and step away from big disasters.

3. Women do more homework. Women are less confident than men, and therefore less likely to be deluded into believing they know more than they do. They want to be in control, and therefore do more research to find out exactly what they are investing in. Women also have more realistic ideas about what an investment can reasonably deliver. In short, they have lower expectations. Therefore, they are less likely to jump on the "next big thing" or fall for a "can't miss" stock tip.

One report found that a quarter of the men surveyed admitted they would gamble on a "hot" investment without doing any real research, while only half as many women would make that same mistake. As a result, women trade less frequently. They incur fewer transaction costs and fewer tax consequences. Women commit to their investments, and because they've done their homework, are more likely to honor their commitments. They are more patient investors and typically do not get spooked by a short-term hiccup in a company's performance.

4. Women realize they are not in control. Surveys have shown that women are more likely than men to attribute success to factors outside themselves like luck or fate. This apparent contradiction – aiming to achieve control when you know you can only control so much -- gives women the perspective they need to avoid panic. And yet, paradoxically, it also allows them to admit when they have made a mistake.

Women look out for the next storm. When it arrives they batten down the hatches and ride it out. They know the market is like the ocean. It is much bigger than any one investor, subject to huge global forces. But over time there's a certain ebb and flow, and if you're a good navigator you can sail on to richer shores.

So how is it that the best investor of all, the legendary Warren Buffett, happens to be a man? Perhaps you should ask author Louann Lofton, who wrote the book: "Warren Buffett Invests Like a Girl: And Why You Should Too."

Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement and other concerns of baby boomers who realize that somehow they have grown up.


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8 Comments

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chandlerrcsc

They dam well are ! They invest at Target, Sears, J C Penney's and every other store that gets in their way.

December 18 2013 at 11:07 PM Report abuse rate up rate down Reply
elrod.porkmore

bs

December 18 2013 at 7:30 PM Report abuse -1 rate up rate down Reply
casseemareej

I don't know one way or the other but I am female and started with 40K in the stock market in 1998. I am a long term investor and so far that 40K is looking like a nice 6M, as a female I must have done something right along the way. Like all investors I realize the risks.

December 18 2013 at 6:52 PM Report abuse rate up rate down Reply
savvylareine

Nice to see the sexists are out in force.

December 18 2013 at 5:52 PM Report abuse rate up rate down Reply
jktejas

This article is not about female shopaholics or any other kind of female addict. The article is a comparison between the investment habits of men and women. I find it spot on. I am by far more conservative than my husband and we keep separate portfolios. While I did take some stock tips from him, we reacted differently to the fall of the market. I bit the bullet and kept what I had and rode it out.....he sold off, reinvested, etc. Realizing I didn't really understand the underpinnings of the market, I put the management of my portfolio in the hands of professionals based in my age, risk tolerance, etc. After years my portfolios crossed the 7 digit mark......and yes, I know all that can change on one really bad day or year. It is also true that if I had kept my risk level where it was ten years ago, I would be more affluent now based on the current market......that's OK.....there is always a trade off for a personal comfort level. So I did find the article pretty accurate.

December 18 2013 at 1:01 PM Report abuse +1 rate up rate down Reply
adika3z

women are more spends spends foolish around shoppings / shoppings / shoppings at the stores too much than men,
women are too much uses makeup chairs, beauty shops, jewelrys, 2 high WTC heel boots / shoes, beggys beggys men wallets, etc etc

December 18 2013 at 12:43 PM Report abuse -2 rate up rate down Reply
1 reply to adika3z's comment
midwestkitten

Not all women are stupid, you are dating the wrong ones

December 18 2013 at 6:24 PM Report abuse +1 rate up rate down Reply
pbjclv

I hate to say it, but I just retired and after 50 years in the hospitality industry. I don\'t know of even one woman who invested is anything but the mall. I believe these stats are skewed. I have been a big praponet of 401k programs and have found it impossible to get even the slightest responce from any woman.

December 18 2013 at 12:16 PM Report abuse -4 rate up rate down Reply
1 reply to pbjclv's comment
midwestkitten

Excuse me, But I am not that old, And I don't go to the malls at all, I invest and make sales...It helps me make a living , I invest in things I can resell for higher....Not everyone is money hungry and looking for handouts.Some women do invest and make wise choices to help their families.I always look to the future, I save for rainy days and medical bills.

December 18 2013 at 6:28 PM Report abuse rate up rate down Reply