Mark Lister: Why women make better investors than men

Mark Lister says women make better investors than men. Photo / Getty Images

COMMENT:

It seems more women than ever are taking an active interest in investing. What's more, they seem to be better at it than their male counterparts.

Fidelity Investments, a large financial services company in the US, released its 2021 Women and Investing Study last month.

It found that 67 per cent of women were investing outside of retirement schemes, up from 44 per cent just three years ago.

One in five reported making their first investment in a new asset class within the last year, with individual shares the most popular of these.

Nine out of 10 women planned to take steps to help their money work harder in the coming year, with a majority keen to know more about picking individual companies.

However, only a third of women saw themselves as investors and just 19 per cent said they felt confident selecting investments.

That apprehension is almost certainly unfounded, especially given the evidence points to women being better investors than men.

Sorry, lads, but in every study I've seen they beat us hands down.

The Fidelity report analysed the investing behaviour of 5.2 million retail customers over the last 10 years and found women outperformed men by 0.4 per cent a year.

That might not sound like much, but in the world of investing it's a sizeable gap.

If you don't believe Fidelity, there's the Wells Fargo Advisors report from 2016. It found that women not only performed better but their returns showed much less variability.

There's also the extensive research from Barber and Odean (which put the outperformance of women at closer to one per cent annually) as well as studies by Merrill Lynch, OpenPortfolio and more.

Mark Lister is Head of Private Wealth Research at Craigs Investment Partners. Photo / Supplied

They all draw these same conclusions.

Women are more likely to follow tried and tested investing principles, while us blokes often think we know better.

Studies show women trade a lot less, are more willing to stick to a long-term plan and are more open to seeking advice.

In contrast, men tend to overestimate their ability, and believe their more frequent trading will make them money. In truth, all it does is cost them more in fees.

Women are less likely to hold a losing position too long, while men will often persevere, insisting the market doesn't understand and that one day they will be proved right.

They don't tend to jump on bandwagons without doing adequate research, nor do they hold such concentrated portfolios.

One study (from Betterment) found men were six times more likely to make massive allocation shifts, such as moving from all shares to all bonds, or vice-versa. Dramatic moves like that rarely pay off.

When reading some of these statistics, it's surprising that there aren't more women in the financial services or funds management industry.

Our firm has more than 180 investment advisers across New Zealand. All are talented, hardworking and knowledgeable, including the 50 that also happen to be women.

Women have the demeanour and temperament to be very good investors. For those who are hesitant to take more control of their finances, my advice would be to educate yourself, do your research, and take action.

The statistics suggest you'll succeed.

Mark Lister is Head of Private Wealth Research at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision Craigs Investment Partners recommends you contact an investment adviser.