Women are better investors than men – what’s the evidence?

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You might think that men are better investors than women (there again, you might not!) But there’s an increasing amount of evidence that shows women are better investors.  Here’s some of the research:

Women are better investors than men

It’s often assumed that men are better investors than women. In fact, a recent study found that just 9% of those asked thought that women were better investors than men. I guess it’s partly because we’re so used to images of men investing and there are far more male role models as investors than female ones. But there’s growing evidence that women are better at investors than men for several reasons:

  • We buy and sell less often. The more often you trade your shares or investments, the more you incur in costs and charges. Men tend to trade more often, which reduces their return.
  • We tend to do more research before we buy a share or fund. We’re often described as more cautious, but I think that women are often right to be cautious and men are sometimes overoptimistic. There’s nothing wrong with doing your research before you take the plunge. In fact, you should!
  • We tend to ignore fads or are less likely to get swept along with them. I’ve lost count of the number of times that a male work colleague or friend will ask me if it’s worth investing in a particular (high risk) company’s share. It may be a good idea, but often it’s just an easy way to lose money.
  • Women spread their investments across a wider range of funds and/or assets. This means that their investments are more diverse and so should be exposed to a lower level of risk.

What’s the evidence that women are better investors than men?

I’ve noticed that over the last few years, there has been an increasing number of studies looking at how women and men perform when it comes to investing. Here are some of the ones I’ve found:

  • Fidelity Investments (US) research: It looked at an astonishing eight million accounts in the US. It found that women put more money into their both workplace savings accounts (0.4% more than men) and investments that weren’t linked to their workplace. Crucially, women produced a return of 0.4% a year more than men. You can read a press release about the research on its website.
  • Barclays Smart Investor: Research carried out by Warwick Business School looked at almost 2,500 Barclays Smart Investor portfolios. Of these, 450 were accounts that women had. It found that over a four year period from April 2012 to July 2016, women’s portfolios earned 1.2% more than men’s. You can see some information about the research here on the Smart Investor website.
  • Hargreaves Lansdown: The investment platform analysed its own customers and found that, between August 2014 and August 2017, women produced a return of 0.81% better than men, on average. This doesn’t sound like much, but if this was the case over a 25-year period, women would have 25% more money than men. You can read more about Hargreaves Lansdown’s research in its press release.
  • Hedge Fund Research: This US-based organisation tracks and rates hedge funds. This is only a short-term study, so it’s not the most useful, but it looked at how well female hedge fund managers had done compared to men in a seven-month period in 2017. It found that hedge funds run by women returned 9.95% in the first seven months, compared to 4.81% for hedge fund run by men. Only 10% of hedge fund managers are women.

SAVVY TIP: Hedge funds are funds that can use borrowed money and invest in pretty much anything they like. They are normally high risk but can deliver high returns. They are normally used by institutional investors (much larger funds that may invest some of their money in hedge funds) or those who are experienced investors with enough money that they can afford to lose some!

Why does this matter?

I think this matters because more women should be comfortable with the idea of investing their money. At the moment, many women choose not to invest and it can be for a variety of reasons. You can read my article on what would get more women to invest to find out some ways I think the investment industry needs to change.

Investing isn’t a competition or a game, and it’s not another episode of a gender war. But one of the reasons why more women don’t invest is that we don’t think we’ll be very good at it.

Related articles:

Investment jargon buster; investment terms explained

Funds for beginners – a guide to ready-made portfolios

How to understand a fund factsheet

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