Get new articles by email freeWomen make better investors
Natalee Roan
July 9th, 2008LouAnn DiCosmo of the Motley Fool has written this provocative article which indicates that overall, women have a better investment style then men, earning 1.4% more than men according to a recent study. DiCosmo says that Buffett approaches investing differently from most men in that he's patient and does thorough research, waits for the right price, and holds his stocks for the long-haul. Her article contrasts Buffett's investment style with findings on how women invest, showcasing the similar characteristics:
- Women spend more time researching their investment choices than men do. This prevents them from chasing "hot" tips and trading on whims -- behavior that tends to weaken men's portfolios.
- Men trade 45% more often than women do, and although men are more confident investors, they tend to be overconfident. By trading more often -- and without enough research -- men reduce their net returns. But by trading less often, women get better returns and also save on transaction costs and capital gains taxes.
- A study by the University of California at Davis found that women's portfolios gained 1.4% more than men's portfolios did. What's more, single women did even better than single men, with 2.3% greater gains.
- Women tend to look at more than just numbers when deciding whether to invest in a company. They invest in companies they feel good about ethically and personally. And companies with good products, good services, and ethics tend to have better long-term prospects -- and face fewer lawsuits.
Nice to know that the frenzied approach shouting at us from CNBC and so many websites and blogs doesn’t work as well as the steady investing using the KISS approach (Keep It Simple Stupid). And through the market highs and lows, keep Buffett’s sage advice in mind: “Be greedy when others are fearful and fearful when others are greedy.”
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Women are more creative with their investments...
When men make an investment, they tend to go it alone, or at most involve a broker or financial advisor. Women, on the other hand, tend to be more social in nature, which makes investment clubs an ideal situation for women investors.
When it comes to choosing investments, women tend to be more commercially savvy than men. They pay more attention to what their friends are buying and what's popular.
Women are also more creative when it comes to finding money to invest. There are now several online investment companies that will allow for the investment of small amounts of money instead of requiring a large initial deposit. In addition to setting aside small amounts of “found” money, set up a direct debit from your paycheck every time it is deposited in your checking account. Even if you can only afford $25 each paycheck, this adds up to $650 a year if you are paid bi-weekly.
Gender Impact on Investing Styles
In other studies, basically men are found to tend to focus on a single task while women have the tendency and ability of multitasking. The same attitude is adopted by men and women when investing. It is the large and bold investments that have more of a risk that men like investing in. On the contrary, women like to diversify their holdings so that they tend to assume lower risk in their investments.
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