Women Are Less Confident Investors — So Why Do Their Portfolios Perform Better?
11:00 am, February 11th | by Amy Tennery
Take two groups of investors. The first is comprised of several people who say they feel confident in their financial plans; they’re ready to make quick trades if they need to and they feel that they have the pulse of the market. The second group, on the whole, is far less confident. They prefer to make collaborative choices and they don’t like making quick moves — even when the market tanks.
So, which group has the better investors?
Turns out, according to heaps of data published in the Chicago Tribune today, that group number two is better. And, in case you didn’t get where I’m going with this, the second group here is women.
Men trade their stock 50-percent more often and men are more likely to unload shares when the economy takes a turn for the worse. And yet, according to studies the Trib cited from 2001 (“Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment,” from UC Davis), 2010 (from the Vanguard Group) and 2011 (from MassMutual), female investors are less confident, more methodical and, well, better. While the instant gratification isn’t there, women still do better in the long run.
This feeds into a common narrative we’ve all seen in recent years: Women, especially when it comes to money, don’t like taking risks. Numerous studies have shown that women are risk averse — and that’s often cited as a reason why women perform worse in the business world.
But if our innate distaste for engaging in high-risk, high-reward (or, as it were, high-failure) behavior works for investing, why isn’t it embraced in the boardroom?