Under the provocative title of "investing like a girl," the author argues that evidence suggests that women can outperform men as portfolio managers for a variety of reasons and that this can and should encourage more diversity where it counts.
Ahead of International Women’s Day (8 March), the following article, from Sandra Dailidyte, a client advisor director for Brown Shipley, argues that women can, to an extent, outperform men in the investment world. She writes that there could be specific female traits that explain that. In the end, wealth management is a results business, and the ultimate arbiter of all these claims must be the empirical evidence. And maybe what this argument also shows is that when the sector talks about diversity, the most important diversity is that of mindset and approach in order to avoid "echo chambers."
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How do you feel when someone asks you to do something like a girl? Offended? Humiliated? How is it that “like a girl” has an underlying meaning of weaker, lower quality and generally inferior than what a man would do? In 2014, Always launched a profound campaign redefining the meaning of “like a girl.” The campaign was a huge success and 76 per cent of viewers after watching the campaign said they no longer viewed the phrase negatively (1).
In light of this, I caught myself wondering what investing like a
Investing isn’t a man’s world anymore; however, according to WealthiHer, women are half as confident as men when it comes to investing. Nevertheless, when they decide to invest, they seem to be better than men! One of the most famous and groundbreaking study on gender differences in investing is "Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment (2001)” showed that due to overconfidence, more men fall victim to reduced investment returns. A recent study by Fidelity (2) covered 5.2 million customer accounts and concluded that when women invest, they outperform their male counterparts by 0.4 per cent annually over a 10-year period.
I embrace equity and I believe that men and women are equal when it comes to their cognitive capabilities. However, if certain traits are perceived to be more feminine, then I am curious to know which ones would lead to higher figures in my investment portfolio:
-- Long-term focus. Women tend to take a longer-term view on
finances which gives them a powerful advantage.
-- High conviction. Women tend to trade at least 50 per cent less.
-- Research. Women spend more time researching their investment choices.
In my experience working as a client advisor, I noticed that women are more engaged in the “whys” of investing. They are often more eager to develop a bigger picture plan before drilling into the details.
At the risk of sounding as though I am stereotyping, next time you are making an investment decision, consider investing “like a woman.” Or at least consider balancing both approaches. It might pay off.
Whilst writing this blog, I found a book with the flashy title of “Warren Buffett Invests Like a Girl: And Why You Should, Too.” It should be an interesting book, let us know if you have read it.