Are Women Better Investors Than Men?
By Elaine E. Bedel, CFP®
President and Owner
Bedel Financial Consulting
Women's Fund Advisory Board Vice Chair
Are women better investors than men? While much of the evidence is empirical, there is a growing consensus that women are better suited to be good investors than their male counterparts. In fact, a study in 2011 by Barclays Wealth and Ledbury Research provided evidence that women do indeed make more money in the stock market. Why is this?
Let's consider some of the reasons:
- Emotional Intelligence: Women tend to think more objectively about their investments, which means they will buy and sell based on the relevant facts. Being disconnected emotionally, allows women to sell a loser. Men are less likely to admit that the purchase was a mistake, causing men to hold on too long.
- Ask Questions: Many say that because women are less confident with investing, they want to research and understand before they take action. Women tend to ask questions before investing; men tend to be more spontaneous in their buying and selling.
- Patience: Research shows that women trade less. Once an investment decision is made, women will give it time. Trading less creates less transaction costs; therefore, better net returns.
- Guided by a Plan: Women are more likely to want a plan for investing that reflects their short and long-term goals. Adhering to an asset allocation based on a plan focuses a woman's investment decisions and increases her probability of success.
Since women have the right temperament to be good investors. Jump-in! But before you do consider these rules for investing in the stock market:
- Make sure time is on your side. Only invest in the stock market if the money can remain invested for at least five years. Or, conversely, never put money you will need to spend over the short-term in the stock market. This strategy will allow you to avoid selling when the market is down.
- Diversify your holdings. Do not invest more than 10% of your stock portfolio in one company's stock. Consider using mutual funds that can provide this diversification along with professional management.
- Don't focus on only one sector of the stock market. Invest in companies of all sizes from a broad range of industries. Large, medium and small companies perform differently during certain time periods as do those in different industries. It is best to have exposure to domestic companies as well as foreign stocks. Again, for most investors, using a combination of no-load mutual funds can make this level of diversification easy.
Women should not fear investing. Do your homework, make a plan, and monitor your investments. However, if you don't have the interest or the time to give to investing, you may want to consider working with a qualified financial advisor. Delegating the investing responsibility, but staying engaged, can be the right decision.Elaine E. Bedel, CFP®, is president of Bedel Financial Consulting, Inc., a wealth management firm providing fee-only financial planning and investment management services for individuals, consulting services for corporate retirement plans, and investment advisory for institutions and endowments. She is the author of “Advice You Never Asked For…But wished you had!” available on Amazon.com. For more information, visit their website at www.BedelFinancial.com or email to email@example.com. Copyright © 2011 Bedel Financial Consulting, Inc. All rights reserved.