5 Reason Why Women Make Better investors than Men
Here are 5 reasons why women, indeed, do make better investors than men
All right, so I’ll stick my neck out and say this (at the cost of getting brickbats from my male colleagues and clients!) – after a decade and a half of advising clients on their investments, I’m convinced that women are, indeed, geared to be better investors than men. No doubt there will be several exceptions to this rule, but it’s a fact that certain aspects of the way most women approach investing increase their likelihood of creating wealth from their investments. It’s an irony, then, that so many women surrender the reins to their investment portfolios to their fathers or spouses! Here are 5 reasons why women, indeed, do make better investors than men.
In general, women tend to be a lot less prone to panic and short-term decision making with respect to their investments. For this reason, you’ll find a lot less self-induced churn in their portfolios, resulting in better portfolio returns, lower transaction charges, and higher tax efficiency in the long run. Women tend to be more passive investors than men; resultantly, they’re better geared to staying with their planned asset allocations instead of succumbing to greed or fear driven decision making.
While men often invest with the singular intent of ‘multiplying their money’, women tend to be more grounded and rational when it comes to their intent. Women tend to invest keeping their future goals in mind, and hence their asset allocations tend to be a lot better aligned to factors such as heir investment time horizon and liquidity constraints. While men tend to be more speculative, women tend to be less tactical and more strategic with their investments, since they invest keeping the larger picture in mind.
While men often tend to swagger into new investments without checking facts thoroughly, women rarely ‘wing it’ when it comes to their money. They tend to be a lot more thorough when it comes to conducting their homework, and hence they’re more likely to be saved from getting locked into regrettable investments. A woman’s natural inquisitiveness, coupled with her heightened power of perception, also helps her draw smarter conclusions about whether to deal with a particular investment professional or not.
Women tend to be more relationship centric than men, and hence – over the long term, we see a lot of them building trust-based relationships with their Financial Advisors. Since they’re less inclined to ‘try out’ new Advisors, they reduce their chances of being taken for a ride by glib but insincere Advisors peddling fancy new investment products. You’ll very rarely see a woman investor dealing with multiple advisors, or moving moneys from one advisor to another unless there’s a very good reason for doing so.
Conservatism has been called a behavioural bias – ad it probably is; but it also has its merits. While a woman investor’s natural conservatism often keeps her stuck in low-yielding traditional assets, it can also lend an air of solidity to her investment habits. Women are less likely to dabble in Bitcoins, over leverage on a punt, or chase the latest trend. If properly channelled, a woman’s conservatism can work in her favour – as she’ll be a lot more likely than men to stick to planned asset allocations, rebalance with discipline, or make wishy-washy investment decisions based on how much money their neighbour made or what TV experts are saying! Women are more likely to live by the Buffett ideology: “"Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.". In mercurial markets, this tilts the scales in their favour.