Are women better investors than men?

Women are increasingly making their mark in the investment world, challenging the status quo that investing is an area where only men excel.

Despite women being stereotypically less engaged with investing than men, there are plenty of studies that suggests that they are, in fact, better investors. Investing’s often a case of ‘mind over matter’ and women tend to possess the investing mindset and psychological characteristics required to be great investors.

What percentage of women invest?

Do women make better investments than men?

A study from Warwick Business School analysed 2,800 investors, both male and female, over the course of three years. They found that women investors outperformed men at investing by 1.8% each year, and also outperformed the FTSE 100 index (the 100 biggest UK listed companies).

While the difference in investment performance between men and women might seem neither here nor there. Investing is a game of marginal gains, which over the long-term, can really make a difference. Especially when compounding is added into the equation.

The table shows the impact of investment returns based on an initial £10,000 investment pot, with the female’s returns being 1.8% higher each year. Stretching over 20 years, the size of the female investment pot is a whopping 40% higher than their male counterparts.

What do women do differently to men when investing?

1. Women are more likely to diversify

Diversification is often called the only free lunch in investing. It means spreading your money across a variety of investment types, geographies and sectors to spread out the risks of investing. Women are more likely to build a diverse portfolio to reduces risk which adds a performance benefit over the long term.

2. Women tend to take less risk

According to the same study, men are more likely to pick speculative stocks, such as shares in small mining companies for example. Speculative stocks have a higher potential return, but they’re also more volatile (the share price moves up and down a lot!) so the chances of investors getting back less than they invest is significantly greater.

On the other hand, women are more likely to err on the side of caution. They lean toward investments that offer more stability and more predictable investment returns. Of course, nothing’s guaranteed when investing. But, as we’ve seen from the chart above, steady returns over a prolonged period of time is key to investing success.

3. Women are more likely to be long-term investors

Research indicates that men are more likely to gravitate towards speculative stocks, attracted by the promise of short term gains. Whereas, women tend to be level headed, favouring a long-term approach and building a portfolio to meet their investment goals and future needs.

4. Investing behaviour

Human psychology plays a key role in investing, and women tend to perform well in this area. Women adopt a ‘sit on their hands’ investment style, whereas men are more active when managing their portfolio by making trades more frequently. For example, in the same study by Warwick Business School, women only traded nine times a year on average compared to 13 times for men.

This could mean women are better at managing emotions such as fear and greed, which can cloud judgment and lead to impulsive investment decisions. The ability to remain calm and rational during turbulent market conditions contributes to overall investment success.

In summary, the data would suggest women are better investors than men and they are starting to see the important part investing can play in creating a more secure financial future.

Investing in funds rather than individual shares can be a great way for investors to get started, both male and female. Funds offer lots of benefits. They’re professional managed by a fund manager who does the hard work for you in return for a small fee, and they’re normally diversified by nature so your risk is spread out.

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