Marya Stark wites about women’s success in investing.
As the end of the fiscal year reminds us, we should all be looking for ways to contribute to retirement savings and invest wisely. This is also a good time for men, and especially women, to assess their strengths and weaknesses – and for the financial services industry to do more to correct false assumptions about investing.
Data show that women can actually be the sober sex. Women outperform men in personal investing – by a lot. “Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment”, a 2001 study using data from Paine Webber, the brokerage, showed that women earned returns on their investments that are almost 1 per cent more per year than men. Almost no professional investor on Wall Street consistently outperforms by 1 per cent per year.
This is a big deal. While men and women both reduce their returns with trading mistakes, men make 50 per cent more mistakes, and combined with additional trading costs, this means men substantially reduce their returns. These findings were confirmed by a 2010 Vanguard study of 2.7m investors.
It is also worth noting that women’s advantages in investing are not limited to amateurs. Among professional investors, women have outperformed men by an even greater margin.
Trust could be a factor. According to a 2013 study by the American Economics Association, people simply do not trust women with money as much as they trust men. The credibility bar is much higher for women.
The consequences are serious. Because women earn less than men and live longer, women over the age of 65 are 50 per cent more likely to be unable to meet their basic daily needs, according to a study of US Census Department data conducted by Wider Opportunities for Women, a non-profit organisation that focuses on women and workforce issues.
While closing the gap in confidence between men and women is unlikely to happen overnight, ending the stereotype that women are not good at investing is a good place to start. Then men too can benefit, by gaining a better understanding of why they are not as good at investing as they may think.
