By Iona Minton

Are women better investors? It sure looks that way. The University of California at Davis (UC-Davis) found that women's portfolios gained 1.4% more than men's portfolios in a study that spanned from 1991 to 1997. In fact single women did even better than single men, gaining 2.3% greater returns on their portfolios.

The National Association of Investors Corporation also found women excelled over men in investing. Their 10-year study showed all-female investment clubs outpaced all-male investment clubs by racking up 23.8% average compounded lifetime annual returns compared to 19.2% for male clubs.

Why is this so? What can we learn from these statistics to secure our financial futures? From reviewing the reasons for these successes, it appears there are some key aspects of women's investing behaviours that have in the past been looked at as negatives, but may actually be positives when used to our benefit:

  • Women look at more than the numbers. They make investment decisions based on personal life experiences. In choosing an investment they consider the quality of the products, as well as their personal buying experiences with the company. Previously this was thought of as being too emotional, but it helps to pick companies with strong, long-term futures.

  • Women test company ethics. Women by nature usually tend to invest in companies that match their social and ethical beliefs. This too fell in the "too emotional" range, but these companies tend to face fewer lawsuits and better long-term prospects. Women take less risks, they don't trade their equity holdings as often and save on transaction costs.

  • Women have less self-confidence. They are less likely to act on a hot tip and tend to carefully research their investment choices. Are women better stock pickers?

    Not according to the UC-Davis study. During the six years studied, men's stock picks returned 18.7% versus 18.6% for women, which is not statistically significant. The reason women did better than men was because of portfolio turnover. Men traded 45% more than women. Transaction fees and capital gains taxes ate up their gains.

    Starting in their teen years, women's math anxiety and lower self-confidence in their financial prowess begin to work against their learning more about investing. This according to the Gender Investment Comparison Study in 1997 sponsored by the Dreyfus Corporation and the National Center for Women and Retirement Research (NCWRR). This study compared the financial attitudes, behaviour, decision-making, investment history, financial goals, and retirement preparation of men and women.

    But, women can use this lack of self-confidence to their advantage and do. They tend to spend 40% more time researching their investment choices than men according to the NCWRR. This helps to offset their fear of making the wrong choice, but also prevents them from acting on a whim or hot tip, which tends to hurt men.

    Women still face greater obstacles in building their financial nest egg and securing their financial future. They live longer, tend to spend more time out of the workforce to raise and take care of their families, and tend to earn less.

    What can you do to improve your chances of living a financially healthy life? Start saving now and often for your retirement. Don't be afraid of making investment mistakes, learn from them. Take some risk in your portfolio, but continue to do that carefully with good research to back up your choices.


    RSS
    Digg
    de.li.cious
    facebook


    Print this page
    Send this article to a friend