Why I invest like a girl, and why you should too!
When reviewing investment performance on just about any level, one thing has become crystal clear! Female investors outperform male investors – and pretty consistently!
There are a lot of reasons for this outperformance. Most of them have to do with women being more stable and less likely to make a big investment mistake. Some of them have to do with other psychological factors.
In her new book Women of the Street: Why Female Money Managers Generate Higher Returns (and How You Can Too), Meredith Jones deconstructs why women are better investors than men. She breaks it down like this:
- We think we’re too good. Men suffer from greater overconfidence. I wrote fair amount about overconfidence in my investing book, but I didn’t differentiate between men and women. Meredith Jones breaks down in greater detail how male overconfidence can really hurt investment performance.
- We trade more. Men are far more likely to “do something” thinking they can control the investment outcome, whereas women make better buy and hold investors. As we all know sometimes it’s better to do nothing rather than do something. Trading just for the sake of trading is usually a really bad investment strategy!
- Men don’t think out of the box. I somewhat disagree with this one because it’s counterintuitive to me. In my experience women are more “tried and true” investors and men are always searching for the “holy grail” or “silver bullet” investment. Ms. Jones believes that women are more likely to dig deeper for investment opportunities than men are. I don’t have the academic research to back up my hypothesis, but I suspect men think out of the box as much if not more than our female counterparts.
- Men are fueled by testosterone. Can’t deny this one. Women have much lower testosterone and therefore are better at minimizing mistakes. She goes on to explain female investors are likely better at stopping investment losses before they become investment catastrophes! In other words women aren’t afraid to admit a mistake when their male counterparts want to be right all the time.
She goes on to cite many other areas which make women better investors, and she does a good job of it. It’s an interesting read if you have the time, and you just might want to start investing like a girl!