{"id":2295,"date":"2023-04-30T08:06:55","date_gmt":"2023-04-30T12:06:55","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/why-women-are-better-investors-than-men\/"},"modified":"2023-04-30T08:06:55","modified_gmt":"2023-04-30T12:06:55","slug":"why-women-are-better-investors-than-men","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=2295","title":{"rendered":"Why Women Are Better (Investors) Than Men"},"content":{"rendered":"
\n

The verdict is in: Women are better investors than men.<\/p>\n

Actually, the conclusion has been addressed, researched, and reported several times now, going all the way back to Barber and Odean\u2019s \u201cBoys Will Be Boys\u201d study completed in 2001, referencing the differences in investment performance by gender. But the lessons to be learned are evergreen and, as you\u2019ll see, gender-neutral.<\/p>\n

One of the fascinating things about Barber and Odean\u2019s research is that they looked not only at the contrast between men and women but the further contrast of single men and single women. As it turns out, the mere proximity of a woman increased the dudes\u2019 investment performance. Men in general, they reported, earned almost 1% less than women per year in their stock-picking endeavors, while single men underperformed their single women friends by 1.44% per annum!<\/p>\n

A more recent Fidelity study shows women outperforming men by less\u201440 basis points or 0.4%\u2014but when compounded over many years, this is still meaningful. For example, someone who invested a million bucks for 25 years at 7.4% would earn $530,657 more<\/em> than an investor who netted returns of only 7%.<\/p>\n

<\/fbs-ad><\/p>\n

And it\u2019s not just your average Janes and Joes; the male underperformance is also seen among the pros. \u201cThe tendency of women to outperform is not only seen in retail investors,\u201d writes Dr. Daniel Crosby in his book, The Laws of Wealth.<\/em> \u201cFemale hedge fund managers have consistently and soundly thumped their male colleagues as well.\u201d<\/p>\n

To what can we attribute this meaningful underperformance of male investors relative to their female counterparts? Men rank higher in two notable ways that lead to their lower performance: overconfidence<\/em> and overactivity<\/em>. The former, Barber and Odean submit, leads to the latter.<\/p>\n

Data compiled by a \u201clarge discount brokerage\u201d company on more than 37,000 investor households showed that men traded their accounts 45% more than the ladies. In addition, the single guys traded an eye-popping 67% more than single women.<\/p>\n

Here\u2019s the ironic twist: According to a study done by the Spectrem Group, men were twice as likely to rate themselves \u201cvery knowledgeable\u201d about investing while women were twice as likely to admit that they are \u201cno<\/em>t very knowledgeable.\u201d Men were also twice as likely to describe themselves as \u201caggressive\u201d or \u201cmost aggressive.\u201d<\/p>\n

This helps provide the why behind Barber and Odean\u2019s primary two hypotheses:<\/p>\n

H1: Men trade more than women.<\/p>\n

H2: By trading more, men hurt their performance more than do women.<\/p>\n

Overconfidence leads to overactivity which leads to underperformance.<\/p>\n

Yet there is another compelling theme between the lines of the more compelling men-versus-women headline. See if you can spot it in this quote from the \u201cBoys Will Be Boys\u201d study:<\/p>\n

\u201cTrading reduces men\u2019s net returns by 2.65 percentage points a year as opposed to 1.72 percentage points for women.\u201d<\/p>\n

Did you catch that? Everybody\u2014\u201cboth men and women reduce their net returns through trading.\u201d Said another way, \u201cHuman beings are overconfident about their abilities, their knowledge, and their future prospects.\u201d<\/p>\n

This phenomenon\u2014that excessive trading leads investors to make less money than the investments they hold\u2014has also been well documented and dubbed the \u201cbehavior gap.\u201d<\/p>\n

So, nobody is off the hook! We\u2019re all prone to overconfidence and overactivity, while the evidence seems to suggest that the much quieter traits of humility, patience, and deliberation are those most likely to lead to reward investors, whether men or women.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The verdict is in: Women are better investors than men. Actually, the conclusion has been addressed, researched, and reported several times now, going all the way back to Barber and Odean\u2019s \u201cBoys Will Be Boys\u201d study completed in 2001, referencing the differences in investment performance by gender. But the lessons to be learned are evergreen […]<\/p>\n","protected":false},"author":1,"featured_media":2296,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-2295","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-featured"],"yoast_head":"\nWhy Women Are Better (Investors) Than Men | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The verdict is in: Women are better investors than men. 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