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When I first started this blog, one of my mentors (a man) told me, “you’re going to have a huge disadvantage writing a finance blog as a woman. No man will ever read it.” (Millions of views and tens of thousands of subscribers later—half of which are men—he’s been proven wrong)
In engineering school, I was outnumbered 8 to 100 as a woman by my male classmates.
And finally, at work, there were two male bathrooms for every female bathroom to accommodate the high male-to-female ratio in my field.
Women still earn 80 cents for every dollar a man makes. And because we have the disadvantage of a ticking biological clock and having to drop out of the workforce to take care of children, we lose out even more on earnings, raises, and promotions.
There is, however, one area that woman have been proven to excel over men:
In fact, when it comes to investing, despite having less confidence about our investing abilities, women’s portfolios tend to outperform a man’s portfolio over the long term.
According to a study at the University of California, women outperformed men by 1% per year when it comes to investing. That may not sound like a lot, but over 30 years, a $1,000,000 portfolio compounding at 6% versus 7% amounts to over $70,000!
Why is this?
Well, here are the reasons why woman are better investors than men:
Women don’t treat investing like a dick-waving contest
Higher levels of testosterone tend to make men feel invincible and take outsized risks. It’s also what causes them to compete against one another, in ever more obnoxious dick-waving contests until they lose their shirt.
Wall Street is full of slicked haired Gordon Gecko types, who brag about how their picks are beating the market.
When, in fact, one of the most successful investors of all time is a woman named “Geraldine Weiss“.
You probably never heard of her, but she ran a financial newsletter with stock recommendations that, over the course of 30 years, delivering returns of +11.2% and beating the S&P 500 returns of 9.8%. She did this not by betting on the next hot stock, but by having strict rules like requiring a dividend grow rate of more than 10% over 12 years, and only picking companies that traded less than 20 times their earnings, with debt less than 50% of market cap.
She’s like a female Warren Buffett, yet most of us have never head of her because she prefers to live a quiet life away from the spotlight.
Because women don’t feel the need to “one up” one another by taking riskier and riskier beats, we tend to invest for the long term and only take calculated risks.
GameStop, Bitcoin, weed stocks. Our inbox is full of emails pitching us these speculative “investments.” The one common denominator? They’re always written by men. I’ve never heard a woman say “Yo, you’ve got to buy GameStop or you’re missing out!” Nor have I ever heard a woman brag about how much she made with Bitcoin or how “boring” index investing is.
Women don’t confuse gambling with investing. When it comes to investing, boring is good.
Women don’t dance in and out of the market as often
Researchers at Cal-Berkeley analyzed the investments of over 35,000 households from February 1991 to January 1997 and found that men traded 45% more frequently than women.
This study was aptly titled “Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment”.
The less you dance in and out of the market, the higher your returns. That’s why our net worth grew from $1 million to $1.7 Million, despite travelling the world and not having a job for the past 6 years. Had I freaked out and sold everything during market dips in 2008, 2015, and March of 2020, I would’ve missed out the massive gains that followed. When it comes to buy and hold strategy and long-term investing, the less frequently you trade, the better your returns.
By staying invested instead of frequently trading, women tend to outperform men in the long term.
Women don’t confuse luck with skill.
Seasoned investors know you can’t predict what the market is going to do daily. We’re in it for the long game. Any short term gains are attributed to luck rather than skill.
However, psychological studies have shown that men are more likely to attribute their success to their own skill, whereas women tend to attribute it to luck. This leads them to feel the urge to buy more in a bull market and sell at a loss in a bear market. They think they can control the outcome but, in reality, it just causes them to buy high and sell low. When you are overconfident in your abilities, you tend to think you need to “do” something because you have the skill to predict the market. Rather than the correct thing to do, which is to buy and hold.
Because women tend to attribute their investment gains to luck rather than skill, they don’t fall for the “illusion of control”.
In addition to University of California’s findings, the Warwick Business School found that, of out 2456 investors, the females in the group outperformed the males by 1.2% per year. Fidelity also conducted another study which found women achieved higher returns and had better savings rates amongst the 8 million investment accounts reviewed.
Obviously, these findings don’t represent every woman or man (or those who don’t find identify with either camp). There are always exceptions to the rule. There are women who treat investing like a
dick clit-waving contest and men who are cautious.
But when it comes to the stereotype that men are better investors than woman, statistics have proven this simply isn’t true. It’s just that we are less confident about our abilities. Paradoxically, our results tend to be better. And even on that front, there’s good news. Over time, our confidence in our investing abilities grow as we age. According to Financial Industry Regulatory Authority (FINRA), 46% of millennial women are confident enough to manage their own investments while 54% of baby boomers do.
So, if you’re a woman and cautious and nervous about investing, don’t be discouraged. Who cares if you don’t know the first thing about options trading? You don’t need to. Remember, slow and steady wins the race. Be the tortoise, not the hare. Your cautiousness is a feature not a bug. If you haven’t already started investing, go to our investment workshop and get started for free.
What do you think? Do you think women make better investors than men? And if you don’t identify with either, what’s your investment style and has it helped or hurt you?
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