Canada's Condominium Magazine
Here’s a slogan a lot of women might feel they can embrace: “Invest like a woman, because money is power.” In the days leading to and following International Women’s Day on Wednesday, there have been numerous stories about how women are different from men when they invest. All of them come to one common conclusion: women tend to be better at investing than men, though women confess that they are made nervous by stock market volatility and that they lack men’s bravado, much of which is fueled, it turns out, by higher levels of testosterone and cortisol in their blood.
One academic study goes so far as to attribute women’s relative success in the market to their ability to use the “theory of the mind.” This is the intuitive ability to detect informed trading opponents who could potentially be “malevolent” toward their interests, and it gives them an advantage in recognising patterns in the data with superior trading intuition. It can be thought of as the reverse of empathy. Little girls aged three to five-years old are apparently very good at this.
Women, say researchers, spend more time evaluating before they make a trade, and they wait longer. They take the maxim “buy low, sell high” very seriously, and seem to be able to time this perfectly.
A study of female investors in Finland gives a striking example of how long they are prepared to wait, and with what success. It occurred in 1998. Finnish women who had bought Nokia stock waited until the stock had increased in value by 5000 per cent before they began selling it to men. In 2002 the stock collapsed. Then in 2007-2008 it began to boom again, and women began selling to men again. At the end of the cycle, the female traders had managed an annual average return of 43 per cent on Nokia holdings, while the men had lost on average 43 per cent.
Conclusion? Women buy stock after severe price falls, then sell to men when prices rise.
We women will not be fully equal with men until we are financially equal with men. Invest like a woman, because money is power.
While it does not have rates as high as 43 per cent to boast of, investment firm Fidelity reported that women investors did outperform men in 2016 by 0.3 per cent, and that the better performance had stretched across the past decade. Again, women were found to use the buy-and-hold strategy touted by famous money gurus like Warran Buffett. They focus on saving and investing for retirement or for their children’s education, not on outsmarting the market.
The downside is that they are fearful of the market, and lack confidence, according to a professor at Berkeley’s Haas School of Business who spoke to CNN Money.
This same finding turns up in a just-released poll from CIBC. The poll, according to a release, shows that women are conservative investors with high risk aversion and a strong desire for safety. A large 70 per cent of women polled said that volatility in the stock market makes them nervous about investing. Other goals, including growth and liquidity, come in much lower in their priorities. The director of Wealth Strategies CIBC, Sarah Widmeyer, commented that women view wealth “in terms of security rather than opportunity.” There is a “confidence gap” among women, and more work needs to be done to build that confidence, Widmeyer said.
The CIBC poll gives no data on how successful women are at investing, but they are certainly very active in the market. Of women who have investment portfolios, fully 92 per cent identify themselves as the primary or equal investment decision maker in the household. Just 7 per cent defer to someone else.
CIBC recommends six steps to close the confidence gap:
- Educate yourself
- Keep cool when investing
- Set clear financial goals
- Create an investment plan
- Diversify your portfolio
- Talk to a financial expert or advisor
Year of financial feminism
Meanwhile, a former Wall Street “power woman” by the name of Sallie Krawcheck recently launched Ellevest, a financial firm tartgeting women investors. Her mission is to empower women financially, and she has declared 2017 the year of “financial feminism.” Women will not be fully equal with men, she told CNN, until they are financially equal with men. After all, statistics show that up to 90 per cent of women will have to take sole control of their finances at some point in their lives. They can’t rely on men to handle the money.
According to CNN Money, some of the best performers these days—this is not an endorsement—are Apple, Facebook, Tesla, Amazon, Netflix, Bank of America, Goldman Sachs, and Advanced Micro Devices (up 300 per cent!).