Are men really better investors than women?

April 14, 2020 Facebook Twitter LinkedIn Google+ Investor,Latest News,Moneylender

Numerous studies have recounted that women make for better investors than men. Although the general perception is that men are better at the game. The truth is that we have fewer women investors compared to men and hence the popular perception that men are better investors. A study published in Fidelity Investments, which analyzed over 8 million accounts, found that women outperform men by 0.4% in investments. Another research by Peter Swan, claims that women are better traders compared to men. The study claimed that women outperformed domestic and international institutional investors with an even more substantial gain.

With so much evidence in front of us, the popular misconception of men being better investors is challenged. While we discuss gender performances in this aspect, the main aim of this article is to not proclaim one gender to be superior over the other, but to break popular notions with the help of substantial data and to get more perspective as to what drives each of these genders to make successful financial decisions.

Strengths of women investors

Women are known to make saner trading decisions. The study by Peter Swan states that women have an unusual kind of sensitivity and are extremely skeptical of pumped investments when prices are rising rapidly. Studies have shown that women are risk-averse and this is a good quality for investors. Another report by the Reuters states that “Women assume less risk, such as not loading up entirely on equities.”

This quality means they are smarter at diversification. It is probably this risk-averse nature of women that makes them better investors in the long run. Another interesting thing to note is that women tend to be more relationship-centric. This enables them to create long-term relationships with their financial advisors. Most women follow the mantra of having a long-term focus, saving more upfront and giving up on trying to time the market with excellent trades. Men tend to be more focused on day-to-day trade.

Women tend to be motivated by things such as security, independence, or lifestyle improvements. Women have a tendency to hold investments for longer compared to men. They are also known to conduct more research compared to men.

How do men do it?

Compared to women, men tend to be more prone to make high-risk oriented investments. On the other hand, women tend to stick to tried and tested content. The equity market is known to be a high risk zone. No wonder, equity markets are more popular with men. On the other hand, women are more likely to invest in targeted funds with a moderate level of risk. As per a report by the HSBC, 58% of men are willing to take a financial risk compared to only 37% of women. Men are known to be more reactive and impulsive in this aspect. The HSBC post also states that men are more optimistic about investment performance. This leads to overconfidence and an over-estimation of their own abilities, as well as an aggressive approach.

Are men really better at it?

The answer is quite tricky. Both men and women function differently in this aspect. Each gender has their own strengths and weaknesses and it is reflective in their investment patterns. Men are better risk takers whereas women have more defined long-term goals. The end result can be good for both of them depending on their finest judgement. No doubt, research suggests that women outperform men but we cannot completely deny the fruitfulness of the approach taken by men.

Moreover, we should take into account the exceptions in both genders as well. There could be women who are known to be impulsive and reactive with their financial decisions. And the same goes for men who are more long-term oriented with their efforts.

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