Are Women Better Investors Than Men?

Heroes or villains, real or imagined, winners or losers- our iconic investors are almost always males. However, studies suggest that men are significantly worse at timing the fund market than women. Women, on average, achieve a 1.78% higher return on their investment annually than men.

This could be because women are better at holding their investments over time and they are more particular about their savings agreements. Studies suggest that customers following a pure savings agreement strategy stand to achieve 2.7% higher returns than people who do not follow it.

This can, therefore, be seen in a way that the ones who do the best are usually the ones who do the least.

Brad Barber and Terrance Odean published an article called Trading Is Hazardous to Your Health in April 2000. The authors went through over 60,000 individual trading accounts for a large brokerage house from 1991-to 96. The results weren’t too favorable for investors with a huge turnover in their portfolios.

The above graph clearly shows that the higher the turnover on the portfolio, the lower the return. Investors with the lowest turnover rate have a better return rate than the S&P 500.

A similar survey was carried out in 2001, however, there was a difference. This time the survey looked at the difference between men and women.

The article Boys Will Be Boys shows that men purchase and sell 45% more than women, which brings down their return annually by 2.65% compared to women whose returns diminish by 1.72%.

The authors justified a high speed of circulation with far too much faith in their knowledge. While too much faith in oneself results in a high turnover, this leads to poorer returns by doing nothing.

Moreover, most men tend to sell early as they try to time the market. On the contrary, women allow their profits to run for an extended period. Although the market usually has a long period of flat or even negative returns, it will eventually rise again.

The chart given below of the S&P 500 since 1st January 1929 right before the famous crash will give you some idea about why it’s important to trust the market.

The above chart doesn’t include dividends, which means that the actual return is even higher than this. Since men tend to sell their stocks earlier than women, they miss out on the returns that their stocks deliver at a later stage.