It is no secret that men and women react to situations in life more often than not with a difference in opinion and approach. The investment market is no exception.
Steve Macdonald, managing director of Infinitas Asset Management Limited, has observed these behavioural differences in men and women over the course of two decades in the financial services industry.
He says men see investing as a form of sport, where women tend to treat investing matters more privately.
“Investing for men can fall partly into a male-driven desire to win with bragging rights during a lunchtime chat at the pub with the boys. For women, investing is a much different and more complex decision that is approached with focus, discipline and patience and is thought-out for the long term.”
A US study found that women sharemarket investors averaged almost 1% p.a. higher returns than men achieved. The researchers attributed the difference to men’s overconfidence in their own abilities leading to excessive trading (56% more frequently than women). A woman’s more disciplined and conservative approach outshone the men.
With women tending to seek more financial discipline than their male counterparts, they are usually found to be saving more, properly researching and understanding investment options or sticking to their financial plans; also making them more risk averse than men, putting financial safety first.
“While women’s core set of commonly displayed investment behaviours are more disciplined, focused and practical, they still must be wary of taking too conservative an investment stance and avoid inertia in their investment behaviour to maximise their portfolio returns,” says Macdonald.
Steve McDonald shares his top five tips for women in or considering investing:
1. There are advisors and portfolio managers who have authentic respect for and empathy with women. Some of them are men and some of them are women. Seek them out. No one should put up with condescension.
2. Moderately conservative investment applied with focus and discipline is a winning strategy. Don’t get talked out of it if it is what you feel comfortable with.
3. The long life expectancy of women means that most women should not avoid investment risk altogether.
4. Remain vigilant against inertia – whether it is leaving cash idle in a low-interest bank account of avoiding the search for a suitable advisor or portfolio manager.
5. Take pride in the fact that women often outperform men in their investment performance. Encourage the men that you know to consider investing more like a woman.