Women beat men on a lot of things.
Women are better learners, have higher IQs, get better grades, have a higher success rate at graduating college, eat healthier, manage stress better, are cleaner and more organized, and have stronger immune systems.
But here’s one thing that might surprise men: women are also better investors.
Don’t believe me? Let’s look at some numbers uncovered by Motley Fool’s research to see why women make better investors than men.
Women get better investing returns
Numerous studies show that women tend to get higher investment returns than men.
The most recent survey, published by Fidelity in 2021, showed that women’s portfolios outperformed men’s by 40 basis points or around 0.4%. An RBC study, which measured women’s and men’s portfolios from August 2014 to August 2017, found the difference to be even higher: women had 0.81% higher growth in their portfolios than their male counterparts.
This isn’t a new trend. In the 1990s, a six-year study by the University of California, Berkeley, found that women’s portfolios outperformed men’s by 1%.
Even professional investors have a gender divide. In fact, over 43% of mutual funds managed by women outperformed their benchmark in 2020, which is 2% higher than men (41%).
Women invest more conservatively
Naturally, we have to ask: what do women do to get better investment returns? Easy: women are careful investors.
When compared to men, women tend to take fewer risks in their investments. For instance, according to Fidelity, women are more likely to invest in target-date funds, which allocate investments according to age, rather than individual stocks.
Of course, one might argue that taking fewer risks might stop female investors from getting enormous gains during bull markets. But sometimes it works in women’s favour, too. According to RBC, women are 50% less likely to suffer a loss of 30% or more than men, simply because they don’t invest aggressively.
This conservative investing nature makes women better at diversifying their portfolios, too. Because they’re aware of risks, women tend to balance stocks with bonds or buy shares in funds.
Women are patient investors
When compared to men, women trade less frequently. Vanguard puts the number at 40% less, while a study between 1991 and 1997 found that men traded 45% more than women. Not only do men trade more frequently, but they also tend to lose more money, too, around 2.65% per year.
For the most, that means women aren’t selling their holdings when the market takes a downturn. They’re not impulsive, but rather stick to a buy-and-hold strategy.
Trading less has another advantage: lower trading costs. When you trade frequently, you’ll pay more fees to your broker. These fees are typically small, but the higher your trading volume, the more these fees sink their teeth into your returns.
What men can learn from women
Of course, these are generalizations. Surely, on an individual level, some men make better investors than women.
But, in general, men can learn to be more patient with their investments. When an investment takes a dip, for instance, men should think twice before selling it. They might also want to invest more money in conservative securities, like funds and bonds.
Women can learn something from men, too, and that’s taking risks. Younger women can especially afford to buy a few risky investments, such as certain growth stocks or small caps. If they choose their stocks wisely, they might just get their hands on a high-quality stock, one whose value explodes over time.
