Battle of the sexes: Male vs. female investors
When it comes to investing, which gender has more success: men or women? Although Wall Street is male-dominated, certain behavioral finance studies suggest that women may have better investment outcomes than men. A particular study done by Warwick Business School comparing 2,800 male and female investors over a 36-month period found that female investors outperformed their male counterparts. In fact, returns for female investors were 1.8% higher than male investors. What caused the notable difference in returns?
Women are often more thoughtful and patient investors
There were some significant differences between how each gender invested, including the number of trades made per year. For example, based on this study, women only traded nine times per year on average, compared to 13 times per year on average for men. However, the most significant difference, and the one that most impacted investment returns, was the types of shares that men purchased. The study indicated that many men may have disproportionately focused on the potential for lottery-style winnings from highly speculative shares that appear cheap but incur significant risk.
A study done by Fidelity Investments found that men may also experience problems dealing with market downswings. One mistake in investing is holding on to shares after they’ve dived, in the hope that they’ll recover. The study revealed that women were more likely to cut their losses, while men often held their shares until the shares’ value dropped to nothing.
Women's skills and strengths
Fidelity’s research found that many of the characteristics viewed as being inherently “female” are actually factors that may help women see strong returns on their investments.
- Think holistically: Women often build financial plans in terms of life goals for themselves or their families, rather than focusing on performance alone. Women tend to hold a more long-term, conservative view with their investments, managing to buy and hold stocks and bonds, versus taking quick action during market fluctuations.
- Take on less risk: Women are more likely to have their savings allocated in a more age-based allocation of investments than their male counterparts. Furthermore, fewer women have their savings fully invested in equities than men (which could represent too much risk and not enough diversification); and women are more likely to invest in target-date funds, ensuring they are well diversified and their allocations update according to life stages as they move toward retirement.
- Practice patience: When comparing the likelihood of buying/selling stocks, Fidelity's study revealed that men are 35% more likely to make trades than women. Furthermore, men who trade made an average of 55% more trades in 2016 than their female counterparts.
Although these behaviors are generalizations based on limited studies, thinking holistically, taking less risk, and being a patient investor are examples of positive behaviors we should all consider while investing.
We can all implement these skills
While neither sex is immune to poor investment behavior, research has shown that female investors may be more likely than men to focus on long-term family financial goals over immediate investment performance which in certain cases could wind up leading to better results. This behavior is something we can all learn from and implement within our portfolios.
MoneyLion hopes to continue empowering female investors
MoneyLion is dedicated to offering financial products that empower women to continue being capable and informed investors. One way MoneyLion hopes to do so is by bringing awareness to the 17% gender pay gap in America through our PaveTheWage℠ campaign. It has been 47 years since the Equal Rights Amendment, yet the pay gap between men and women is still a reality in the United States — on average, women earn 17 cents less than men for every dollar earned. MoneyLion has pledged to give members 17% more pay (up to $599) on their first direct deposit into MoneyLion Checking.
TERMS AND CONDITIONS
Limited time offer. This promotion is open to all genders. Matching contributions are limited to $3,000,000 in aggregate. Individual matching contributions are limited to $599 per person. Promotional period ends when maximum matching contributions are reached. Must maintain direct deposit into MoneyLion Checking Account for at least 90 days to receive matching contributions. Eligible matching contributions will be deposited into MoneyLion Investment Account. Must be a MoneyLion member in good standing at all times until payment of matching contributions. See the Official Rules for additional terms, conditions and eligibility requirements.
MoneyLion Visa Debit Card issued by Lincoln Savings Bank, Member FDIC. MoneyLion Checking Account provided by Lincoln Savings Bank, Member FDIC — Cash advance requires direct deposit into MoneyLion Checking Account.