The image of one of our smart investors is likely to be streaked, fed testosterone, and ruthless risk-taking. However, those with female persuasion are at serious risk of being overtaken.
One of the largest studies of investment activity at the University of California in 2001 showed that men traded 45% more often than women. However, the average risk-adjusted return was 1.4% lower. Another large survey conducted by DigitalLook found that in the year ending July 31, 2004, women’s wallets grew by 3% more than the FTSE, while men’s portfolios grew by 1%.
Since then, evidence of female dominance in investment markets has been steadily increasing. Now psychologists can identify the character traits that make up a winning investor. Also, more men are determining why they are counting losses in the markets as they explain these characteristics.
What are some of these traits that put you on top of each other? Better investment performance for women may be due to:
- Wiser
Women’s wallets are more balanced and diverse. Lower risk, less faddy, they also choose options.
- Less competitive
Women invest less of their ego in a deal. They are less motivated to prove their financial ability to others or to be excited about it.
- More consistent
It has been shown that women protect a smaller wallet than men. They are also better at deleting “information” that others might overreact to and dealing with market fluctuations.
- More patience
They make fewer funds jumps, trade less often, and keep their investments longer. Those who trade the most get the least profit, according to research by Barber and Odean (2000) and Carhart (1997). This is the case for both individuals and mutual societies.
- Better researchers
Although women are generally less experienced investors than men, they will do more in-depth research and the herd will not be affected.
Of course, these aspects of the female psyche also make women more conservative investors than men. And so it is likely that the stratospheric gains (or mega losses) that men make will be derived. But by investing in funds that are consistently good over time, women’s net returns are higher. And isn’t that worth it in the end?
Of course, many men have what it takes to be a top investor. But their winning traits may not have been the usual masculine ones. Really top male investors may have a greater relationship than they think with their feminine side.
In addition to the lack of estrogen and fewer bags, what else is the division between winner and loser? There are three key psychological traits when it comes to making smart investment decisions that can deceive men on a regular basis.
These are:
- Attitude towards risk
Men are less at risk than women and will protect their wallets with greater security. It’s likely to put all your eggs in one basket instead of choosing a safer, more diverse pouch. Men’s higher earnings and net worth make it easier for women to take higher risks than women. A 1994 U.S. study by Wang also showed that women are more likely to be offered safer opportunities than men, with advisers hoping to be risk-averse.
- Overconfidence
Excessive confidence is constantly found in more men than women, research shows. And this is especially true in areas where men predominate, such as finance. They overestimate the return on investment and the certainty of return. They also have an overconfidence in the accuracy of their knowledge and overestimate their abilities. In a Gallup study, both men and women expected their portfolios to outperform the market, but men expected them to outperform them.
- Artalde instinct
Constantly controlling the market can feed men’s over-activity and cause them to act irrationally. Men are likely to be attracted to financial-my-leader in games and information leaps. They also feel bad about being over-informed, instead of disabling the endless stream of news and financial information and holding on to their annual portfolio review.
While there are more inherent skills that women can get the most out of, there are unfortunately few of them at stake. Male investors are more than eight and one female, and only 3% of hedge funds are managed by one woman. Simonne Gnessen, who owns Wise Monkey Financial Coaching and is primarily a female client, says women would rather borrow from this overconfidence of men. “Many women have everything they need to get financially dizzy,” she said.