1/7/2014 6:45 PM ET|
4 ways women make better investors
Guys could stand to learn a few things about investing from their female counterparts -- such as the virtues of patience, risk aversion and research.
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 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, such as Warren Buffett.
But when tallied over the long term, women generally produce better investment returns than men. Here 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 one. 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.
Another 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 reckless 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 who are less confident than men are less likely to be deluded into believing they know more than they actually 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 from their investments. 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."
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Complete garbage, especially point # 2. Yes, women take fewer risks than men, and that is why their results are usually less. Intelligent risk is rewarded commensurably.
Also point # 1. If you don't think women are competitive, you haven't seen them in action trying to get something they really want, and/or in competition for masculine attention or with other women for a guy that they both want.
Is "Tom Sightings" a nom de plume for some female writer? It sure looks like from the silliness propounded by this article.
What a nonsensical article.
One of the first rules of investing Is "No guts no glory". If you are risk averse, you can't get high returns. That is a fact. Men take more risks and that is exactly why they are BETTER investors. Sensible risks are necessary to great returns. The author is obviously ignorant of this fact.
Whether or not women are better investors:
In April, 2001 we had a market crash. Everyone took a hit. In a major bank where all the personnel deal in financial aspects everyday, the vast majority were caught off-guard. As people co-mingled and discussed circumstances... only women in that bank had dutifully kept 100% of their retirement money in the corporate stock option in the offered programs. Stocks took much greater hits individually than funds with diversity did. Some women lost over 90% of their account values!
Of couples who both work, who then approach the courts for divorce... she will demand half of all the assets in settlement. But the courts are no longer acknowledging the "half" outcome in cash. Articles here on MSN have indicated he gets alimony and assets of equality (he/she each have financial accounts), judgments divide the accounts, not the monies in them. If his rollover has gains greater than hers but both had the opportunity to invest and grow, she gets what she's got and he gets what he's got.
Just today-- an article appears that 42 MILLION women are on the brink of poverty. Certainly, the number includes specific hardships, but more than not, it's women who manage money poorly or not at all. There are actually more women working then men and a jobs blockade in play today. A better article would be-- how over 90 MILLION Americans are surviving while just 5% of earners hoard our entire currency and cause nearly 100% of our debt. Let's get real, MSN.
I had a woman financial manager on one of my accounts and she was not good. I fired her and
manage the account myself. Guys you had better watch behind you as the women are going to take over by getting everything they want in all fields. California has 2 Senators ladies but I can't remember who they are. They never do anything.
I wouldn't turn my investments over to a woman as most don't know what a stock or bond is.
Seems, more women are adverse to risk, long term or buy and holders of good companies,
plus have the patience gene, that many men don't possess.
Probably a pretty good mantra, to use; Other successful investors deploy similar concepts.
Click on the avatar for YOMTV. READ the posts. You tell me... these responses (mostly) are in the exact same vernacular that Mr. Fat Cat and Crazy8s are. These are the same person!!!
PLEASE MSN... the human behind these ID's is extremely mentally ill. The fact that he is now using a she false ID is bordering on insanity. The person needs help, banning all access HELPS them to stop living a delusion and maybe starts them toward help and therapy.
The only thing Women might have on some MEN, Greed when it's their own money as opposed to the Man's money. When it's the Man's money, they want it all. When it's theirs, not so much. If women were such better investors on Average, they would be controlling Wall Street already, they aren't.
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