Validea is an advisory service which assesses stocks based on the investing criteria of many of the ...
Want to Make Money? Invest Like a Girl
08/06/2012 10:30 am EST
It may sound stupidly simple or a bit chauvinistic, but studies show women are better investors...so swallow your pride and hear what the experts are reporting, writes Felicity Glover of The National.
I am just going to come right out and say it: women are smarter investors than men. I can hear those overconfident boys in the back row sniggering already. I'm not saying it because I'm a woman; I'm saying it because I believe it is true.
Of course, it depends on the circumstances, but if both sexes have the same opportunity to invest, say in stocks, then it is the woman who has a better chance of coming out on top on profits.
But it's not just our investing nous that is putting men in the shade. Even our IQs outstrip our male counterparts, according to James Flynn, a renowned intelligence quotient expert.
Flynn, a researcher based in New Zealand, this month told Australia's ABC News that women had "closed the gap and even inched ahead in this battle of the intelligent sexes" for the first time in a century.
"Over the last 100 years, everyone in the developing world has been gaining about three IQ points, but women have been gaining faster," he told the government-owned broadcaster. "This is the result of modernity. In every country where women have an equal chance of modernity, women have caught men [in IQ results]."
But back to investing, and why we are better at it. According to a research report by Barclays Wealth and Ledbury Research, women make money from financial markets because they take fewer risks. Women also hold on to their stocks longer, rather than constantly trading or selling them in a panic, a trait often seen with men.
But here's what is interesting. The report says many women lack confidence and composure when it comes to investing, but they still manage to make bigger profits. "Women reported a greater desire for self-control in their approach to financial management," the report says.
"This relationship can be explained in part by lower composure in women; women are likely to get stressed more easily and their awareness partially accounts for their greater desire for financial discipline.
"However, it is men who actually have a greater need for discipline when it comes to investment management as they tend to be overconfident in investing, leading to lower returns."
I'm not the only one who thinks women are smart investors.
LouAnn Lofton, who works for The Motley Fool, an investing Web site based in London, is the author of Warren Buffett Invests Like a Girl And Why You Should Too. Clearly, she's a strong proponent of the staying power of women and their ability to grow their money.
She first saw the link between Buffett's investing prowess and that of women a few years ago. "The one trait shared by the 90% of the bad actors who got us into the financial crisis and global meltdown of 2008—and many of the Wall Street traders, short sellers, and analysts who panicked and made it worse—is a Y chromosome," she writes on The Motley Fool's Web site about her idea for the book.
"And the one high-profile investor who stood above the fray of this unruly, destructive crowd? None other than the man who launched my career in finance and changed my life—Warren Buffett. When the dust settled, there was no denying it: Warren Buffett invests like a girl."
Buffett invests like a girl because he spends time researching the companies he is investing in and keeps a long-term view on those investments he makes. As he is often quoted as saying: "Only buy something that you'd be perfectly happy to hold if the market shut down for ten years."
But if there's one trait Buffett doesn't share with women, it has to be that everybody listens to him. And why wouldn't they? He is, after all, the "Oracle of Omaha," and the world's third-richest man with an estimated fortune of $44 billion, according to Forbes magazine.
So if women are so successful when it comes to investing, why aren't we treated with the respect we deserve, especially from financial advisors? A study by the Family Wealth Advisors Council in the United States found both the "amount of wealth controlled by women and the rate at which it is increasing are extraordinary."
But the financial services industry continues to ignore them, the study says, despite the fact women in the US control 51%—or $14 trillion—in personal wealth, a figure that is expected to grow to $22 trillion within the next decade.
"Women are leading Fortune 500 corporations, winning top political posts and enjoying more career choices than ever before," the study says. "By 2030, women will control two thirds of the nation's wealth—a result of strong organic growth rates buoyed by trillions in generational and spousal transfers.
"Despite these significant inroads and potential opportunities, barriers remain—particularly in the financial services industry. Women of wealth are more dissatisfied with this industry than in anything else that affects their daily lives.
"They believe their gender is a key factor in the disrespect and condescension they have often experienced and the poor financial advice they have received."
But that's OK. We are doing pretty well on our own, anyway—more so because we invest like Buffett.
Related Articles on STRATEGIES
The Roman philosopher Seneca wasn’t talking about the stock market when he wrote that “T...
The Dow Theory was originally referred to as “Dow’s Theory,” since it was based on...
When stocks are selling at valuation extremes and consumer optimism is at one of the highest levels ...