Portrait by Keanan – age 7 – of me 🙂
It’s been quite the year for gender issues. And here’s another: the investment gap.
Men, look away now. Women are better investors when they take the plunge.
But there’s another side to the investment gap – simply explained with ‘if’ instead of ‘when’ women take the plunge. You see, fewer females invest and the effect of this compounds over their longer lifetimes.
And so, to celebrate March being Women’s History Month, and with yesterday marking International Women’s Day, I’m calling on women to take control of their wealth.
It’s time to join the other movements out there this month, and add financial feminism to issues raised. Earlier this week the Oscars laid bare outrage and anger felt by many women, and not just inside Hollywood, at how females are treated. Look up the #MeToo and #Time’sUp movements to find out more.
So, in the spirit of bringing about change to enable females to live with dignity, I’m going to be focusing on women this month. Today’s message: invest like a woman.
First off, you must want to do it.
No one will care about you, including your money-life, your life generally, as much as you do. Ergo, you must be in control of your own finances. Knowledge is power; money is power – the power to live as you deem fit.
And now let’s look at characteristics to celebrate and ones to stymie:
• Slaying self-doubt
Self-doubt is a double-edged thing. Women are less confident when making investment decisions and take longer to make them. This costs the female investor as her money isn’t working as hard as it could be.
But these very qualities make women investors better off. They are more risk averse – meaning they study and want to understand risk. It does not mean women don’t take risks. Couple this with more confidence in their abilities and you can see a winning formula emerging. Don’t confuse confidence with competence.
• Patience brings value
Women investors are less likely to time the market – they hold onto stocks and shares. Which means less transactions, lower fees and higher returns.
• The cost-benefit of self-help
Women are more open to learning about strategies, self-control and discipline, and then implementing and abiding by them.
• Sticking to the plan. No need to elaborate.
Do this, and you get investors who are less prone to emotional trading, and more likely to adhere to financial rules. Things like not dipping into capital invested, only using returns and not checking daily prices. Things that mean they’ll lose less than traders who succumb to irrational behaviour.
According to research from the financial services firm Dalbar, this human irrationality of timing the market, panicking, selling, buying, then selling again, means the average investor gains less than an index fund left untouched over the same duration.
Add to this that women save more to start with and you have all the ingredients to become a great investor.
Go on, invest like a woman: be calm, save more, do your research and hold on for the long term.
This is likely why women-owned and -managed hedge funds have outperformed standard indices every year since 2007, when Hedge Fund Research started tracking performance by gender, according to a 2015 KPMG report.
Most of us are not hedge fund managers though, so what does this mean for the average person? Well, the same holds; women investors outperform men by 1 per cent roughly every year, going on the findings of academics Terrance Odean & Brad Barber of the University of California. Compound that over a lifetime and you have serious differences in money.
But none of this will happen without the core belief that you are worth it, you can do it, and yes, you really are equal.
And listen up: Warren Buffet says he invests like a girl. Up your game by getting in the game. Invest like a woman.
