Are women better investors than men?

Are women better investors than men

Hi everyone! Hello dear investor! Welcome everyone who is willing to make changes to his or her life and who chart their own destiny. We are not selling religious views. We are not messiahs so please calm down. Despite the fact for many it is an actual religion… we are going to talk about money. Yes, about your money, about our money, and about everyone’s money.
We are struggling to come up with a topic to start that will fascinate you. We have lot of topics for you so we have lot of choices. So it was a hard decision to select this first topic to bring to you. And finally we decided to put in a boxing ring “men versus women”.

No, no, no! We are not literally going to have you watch a fight as we know many strong women. You are going to help us decide what sex type is a better. Is god a man or a woman? An old age question of if a woman is better than a man. Physically men are stronger than women. Philosophers on the other hand tell us that women are better than men. At the end of this thesis you will help us decide who are better. More over which sex is a better investor? Let’s first look at some of the studies available to us.

Per US Bureau of Labor Statistics women are different than men in how and what they purchase
2015-2016 Consumer Expenditure Survey by the US Bureau of Labor Statistics for single women and men did show many differences in terms of how and what they shop:

  • Overall Spending by Single men was about $2,000 more than single women. Please note that men earned about $10,000 more per year than women.
  • On Food and Alcohol single men spent $800 more than single women.
  • While on Apparel and Personal Care products and services single women did spend $600 per year than single men.
  • For Automobile related expenses including vehicle purchases, gas, and maintenance single men spent $2,200 more than single women
  • When it came to Entertainment related expenses surprisingly single men and women spent roughly equivalent amount of money.

There are numerous studies out there that have shown us that:

  • women have better IQ than men and
  • women have better memory than men
  • under stress women work better than men
  • physically and mentally women can tolerate pain better than men

Let us analyze these characteristics further.
Physiological working wise women have better body than men! Women with better brain workings than men allow them to work better under stressful situations. All of us know the wonderful fact that women can grow and deliver a human being from their body! This is a good example of women can tolerate significant changes better than men. Women can thus withstand pain better than most men. Another well-known statistically proven fact is that women live longer than men. Women have more time on earth than men to learn and do more things.

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When it comes to investing in many ways women and men see things differently:

  • Are men are more interested in investing than women as a group?
    BlackRock’s 2015 survey also found that:
    a) younger women take less interest than their counterparts (36% of Millennial women say they enjoy managing their investments, compared to 70% of Millennial men).
    b) younger women take a more active interest in their investments than older women as their life focus and occupation was their family
    So the answer is yes! Men are more interested in investing than women.
  • Are women less confident with Money than men?
    Fidelity study “Single Women and Money,” concludes that single women are less likely than to say that they’re knowledgeable about investing, saving for retirement, or creating a financial plan than single men.
    So the answer is yes!
  • Do women Seek more investment Help than men?
    Because of women’s lack of investment knowledge makes them avoid investing on their own. Per Kiplinger Study women are more likely to seek professional guidance to manage their money than men.
  • Are Women Focused More on the Long Term Investing while are men truly short term focused?
    We hope that you are not offended but in our opinion women are natural ‘nesters.’ Women, with their innate nature, are more focused on long-term investment goals than men including worrying about financial well being of their family. Men are more focused on how they can increase their wealth in the very near future.
    So the answer is yes. The sexes differ in investing time horizon.
  • Do women Trade their Investments Less often than men?
    Fidelity’s analysis shows that women with their long term investment goals follow ‘buy and hold’ investment strategy. Men on the other hand are much more impulsive and make frequent buy and sell trades in hopes of improving returns. In other words men are more ‘Active Traders.’ Men with higher investment portfolio churn over therefore pay more in brokerage fees and more in taxes.
  • Do Men Take Higher Investment Risks than Women?
    Answer is yes! BlackRock study finds that for chasing higher returns men take higher risks than women.
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Fidelity’s 2017 Study concluded that on average, women’s investment portfolios earned 0.4% more than men’s during economic upturn. Other studies have found that women do lose less money in a downturn than men!

This leads to questions we all are interested in:

  • are women better with money than men?
  • Are women better investors than men?

The answers to both questions is overwhelmingly Yes! Women do save more as a percentage of their income than men. Women also make higher investment returns than men on their investments and also lose less during economic downturn. More importantly, women take lesser risks and achieve higher returns than men.
These results are due to the fact that men are more impulsive than women. Men are more aggressive in taking higher risk in order to get same investment returns than women. This can be explained again by men with their physiological differences due to testosterone.

The following guidance one can glean from the battle of the sexes:
A man should learn from a woman in many ways especially when it comes to investing….
Apply a long-term investment strategy,
Be patient and follow a ‘buy and hold investment strategy’ instead of continuously buying or selling financial securities – also known as churning,
Be smart about risk taking
These are some of the keys why women are better at investing than men!

Sunil Kulkarn

Sunil Kulkarn

Written by: Sunil Kulkarni, PhD, MBA, CFA

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