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Most statistics regarding women and money are pretty depressing – women tend to earn less, have smaller superannuation balances and fewer assets than men across all age brackets. But the news is not all bad, and research regarding women and the strength of their investing talents suggests that women have the power to dramatically improve these outcomes now and into the future.
So what makes women good investors? Women have been found to be more risk averse than men, and, despite the jokes about spending on shoes, save a great proportion of their income as a result – adjusted for income, 0.4% more of their salary on an average basis (Women in investing whitepaper, Fidelity Investments). When they invest, they are more likely to commit to and retain longer term winners, and divest poor performing assets with less compunction. Research published in the Quarterly Journal of Economics (Boys will be boys paper, Berkerly) showed that male investors traded nearly 50% more frequently than female investors, increasing their costs and lowering their returns. In their findings, both men and women tended to trade out of winners and into losing stocks, however women made this mistake with significantly less frequency. Investment management behemoth Vanguard published similar findings nearly a decade later (New York Times), showing that male investors were ‘much more’ likely to sell their portfolios at the very lows of the Global Financial Crisis, realising large investment losses.
In Australia, the University of New South Wales Business School published research in 2017 stating that ‘women make better investors’. They found that women spend more time researching their options than men and are better at matching their investments to their life goals. They also found women tend to trade less and when they do, remain calmer during the storms that unnerve male investors on the financial high seas - important characteristics in today’s market.
The UNSW research found that female individual investors outperformed not just individual male investors, but also domestic and international institutional investors. They also found that women were buying undervalued shares and selling those they perceived to be overvalued and were sceptical of ‘pumped up’ stocks. Over a 17 year timeframe, that led to measurable outperformance.
Given the strength of the data suggesting women can invest with confidence, it is pleasing to see evidence of women coming to the sharemarket to grow their wealth. Through an analysis of the nabtrade investor base, women tend to start both investing and trading later than their male peers, represented by fewer Generation Z women who are actively invested in the market. Of those young women who do start investing, however, they hold 20% larger portfolios than men of the same age, trade less frequently but do so in substantially larger parcel sizes, reflecting conviction in their trading choices.
Generation Y and X women have equal assets invested to their male peers, and tend to show more patience and higher conviction with their investment strategies, trading less frequently but in higher values. Overall, nabtrade’s female investors turned over their holdings 6% less than men in 2017, and their portfolios have grown more strongly over the last three years than those of their male counterparts. These findings are consistent with global research that points to better portfolio returns for women as a result of their different behaviours.
This data doesn’t change the financial realities for women facing lower superannuation balances at retirement, or earning lower salaries despite the Equal Pay legislation enacted in the 1970s. What it should do, however, is give women, young and old, the confidence to begin or continue their investment journey. The opportunities that exist for all investors, male and female, young and old, are significantly greater than at any time in history, thanks to lower costs, faster and more effective investing tools and fantastic education and insights that were previously unavailable to the average person. As the research Indicates, women who wish to take responsibility for their financial future have reason to believe they have the skills and ability they need to invest well.