Why Women Are Better Investors

Do you want to become a better investor?  If so, I’d encourage you to look at the lessons that female investors can teach us.

During the last decade, there has been a plethora of research on the investing differences between men and women.  At the outset, it wasn’t exactly clear what the research would show.

But by now, the evidence is clear: women have qualities that make them far better investors than men.

The reason for this doesn’t come down to intelligence, as pure IQ doesn’t necessarily correlate with being a great investor.  Instead, the difference comes down to women’s temperament.

Two main reasons Why Women Are Better Investors

Studies have shown that women have a natural temperament that is more advantageous to good investing.  

What traits, exactly?  They are calmer in their emotions, have a long-term outlook, trade less, remain more steady under pressure, take on less risk and are more realistic about their investments.

I know that’s quite a list, so I’m going to focus in on two things that I think are essential here.

First (and most importantly), women have more control over their emotions, especially in the face of bad news.

One example of this came in 2008.  In 2008, when the Great Recession was taking an enormous toll on the stock market, women did decidedly better with their emotions than men did.  

Men were much more likely to overreact and panic about the market and the lowered value of their portfolios.  They got scared and started selling. At the worst possible time imaginable. Women, on the other hand, had a better handle of their emotions.  They knew that these fluctuations in the market come and go. And while it wasn’t easy, they stuck with their investments.

Which means that when the market rebounded in March 2009, women were more likely to be invested and able to capitalize on the 26.46% return that the U.S. markets had in 2009.  Men, sadly, were much more likely to be in cash and miss out on those gains.

The first lesson we learn from women is to be in control of your emotions and not overreact to bad news.

The second lesson is to not be overconfident.  

With so much information and news about financial markets today, it can be dizzying to keep up with it all, or even assume that you know what all of it means.  

Which is exactly what men are more prone to do.  Take short-term financial news as an example (which you can find on CNBC at any minute of the day).  Men are more likely to pay too much attention to this kind of “news”. Why is that a problem? Because the daily news cycle is is basically meaningless noise.  And it has virtually no impact on you reaching your long-term financial goals like saving for retirement, paying off that mortgage, or saving for your kid’s education.

Women tend to not know what to make of this noise, or to avoid it altogether.  Men, on the other hand, think that they can make sense out of it.  But they can’t. No one can! And if you’re too confident and think you can, you’ll more than likely to end up making improper and unwise investment decisions instead.

So there you have:  If you want to be a better investor, you should follow these lessons from women investors.  Most importantly, keep your emotions in check and don’t be overconfident.  If you need someone to help you stick to these wise strategies that women teach us, I’d love to see if I can help.  You can email me at scott@forthrightfinances.com, call me at 424-258-4460, or contact me here.

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