Women are better brokers
“While neither sex is immune to shoddy behavior, research has shown that female investors are more likely than men to focus on a family’s financial goals over their own absolute investment performance. A study by the Warwick Business School concluded that women outperformed men at investing by 1.8%. For one, women avoid ‘lottery style’ trading and are more likely to focus on shares with good track records or on overlooked yet productive funds.”
—Consider firing your male broker, The New York Times
The fact that women tend to outperform men at investing should be old news by now. The classic Terrence Odean study on the subject (cited in the above article) came out in 2001, and new research seems to appear every year corroborating the Odean findings. The evidence shows that women take less risk, save money by avoiding hyperactive trading, and often come out ahead in the end.
Yet this take on investing and gender makes headlines every time—mainly because our concept of the world of high finance is so warped by stereotypes. We think of the boys’ club fantasy of Wall Street, where high risk nets high reward. (Hello, Mr. Gekko.) In fact, research shows that men’s overconfidence is their downfall in investing. When men assume they know best, trade frequently, and don’t stick to the slow-and-steady growth approach that is key to smart investing (just ask Warren Buffett), they, on average, lose. And when a whole generation of male brokers becomes united in a mass frenzy of overconfidence, we all lose.
This is why I’m grateful for every inch of coverage this issue gets, especially from the perspective of a female investment advisor. Blair duQuesnay points out that women’s proven propensity for measured, risk-averse investing is the quality everyone should seek in a financial advisor. And it’s what you should want in a financial advisor (assuming you need one): someone who puts long-term growth ahead of short-term gain.
Financial advising remains a male-dominated field—as duQuesnay notes, only about one in five is female. That’s why I’m excited about the next generation of women investors, like the college students I met at the Smart Woman Securities conference last fall, and why I encourage parents to include their daughters in conversations about money from a young age. Especially as the economy heads into potentially shaky territory, we all might do well to follow our more feminine instincts in investing.