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Why women are better investors than men - study

Aug 25 2019 08:12
Carin Smith

Women outperform men by 1.8% when it comes to investment performance, according to a 2018 study by the Warwick Business School.

The study tracked 2 800 investors' behaviour and investment returns for three years.

It found that women investors not only outperformed the FTSE 100 during that period, they also outshone their male counterparts. While annual returns on investments for men were on average a marginal 0.14% above the performance of the FTSE 100, annual returns on the investment portfolios held by women were 1.94% above it.

Outcome-based approach

Women align with an outcome-based approach to investing, the study found.

They tend to take a longer-view perspective of investment.

In general, women seem to have a more considered approach to investing.

"The behavioural qualities displayed by women investors – many of which are aligned to an outcome-based approach to investing – may explain their superior performance," states the report.

"Women have a greater focus placed on the realisation of a financial goal, rather than the thrill of investing."

Less frequent trading

The study found that women only traded nine times a year on average, compared to 13 times for men.

Type of stocks

The study found that the biggest difference, and the one that impacted the returns women made on their investments, came in their appetite for the type of stocks they chose compared to the men.

Men tended to pick more speculative stocks. Women investors were less likely to indulge in the so-called "lottery style" of investment that appealed to men, according to the research.

The Warwick Business School analysis defines "lottery style" investing as a tendency to invest in more speculative, lower priced shares that might increase in value substantially.

Women tend to want to keep shares that show a loss while selling off their winners – the ones that have actually increased in value.

"Men are just a little more likely to be drawn to more speculative stocks whereas women are more likely to focus on shares that already have a good track record," states the report.

"Women also take a more long-term perspective, trading less frequently. This possibly means women are investing more to support their financial goals, whereas men are attracted to what they see as the thrill of investing."

investment  |  womens wealth  |  money
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