Today we have a guest post from Frugal Rules about how women invest differently from men. Enjoy!
It’s no secret that women are far different from men in a multitude of ways.
Women dress differently, talk differently and act differently than men. We also handle our finances differently in many ways. For example, women tend to be more cautious when it comes to building an emergency fund, and paying off debt less aggressively in order to prioritize savings. But, you may not realize that we also invest differently too.
When it comes to investing, here 5 things women investors do differently from men.
Women Do More Research
We have all heard the stories of how women travelers will stop and ask for directions or a map if they are unsure of where they are going while men typically will not ask for help of any kind. Women investors do the same thing.
Many studies done on the topic show that women tend to do more research, ask for more help, and learn more about their stocks somewhat more than men do and if they don’t know something, they will do the research needed to find out or get help with investment choices.
Why do women do this? The answer could be, in part, because women tend to be more conservative and less confident in their investment choices than men causing them to research more not only to get a good grasp of investing strategies but also to get to know the companies they may potentially invest in.
Women usually make a larger percentage of purchases for their households than men do which puts them in a unique position to know what products and services are selling well and therefore worth investing in.
Women Take Less Risks
Because women are more conservative than men, they take less risk in their investment methods. Analysis of the differences in portfolios of women and men indicates that the overall returns on the investments women make tend to be higher than the returns men make and this could be partly due to the fact that women don’t take as much risk in their investing. Men want to go for the big win while women are completely satisfied with smaller gains on their investments.
Women Trade Less
Women will hold onto their stocks longer than men and trade less often than men. Once again, this could boil down to a lack of confidence or a feeling of not knowing as much as men investors due. As a result, women will stick with their investments rather than pulling money out of an investment to invest it elsewhere in a riskier, less well known fund.
Women Tend to Lose Less
Over the long haul, the investments women make lose less money than the ones men make. This could be due to the fact that men invest more in higher risk investments and also tend to do more investing on their own rather than researching or asking for advice or help.
Also, because men trade more they tend to lose a little more in their investing than women do. Greater frequency in trading also increases the costs of trading which, of course, eats away at the profits you make from your investments.
Women Ask for Advice
Just like the story about asking for directions, women will ask for advice in their investment choices more often than men will from friends, colleagues and professionals. Men are more likely to invest alone. Of course, because women ask for advice or help from others, their investment choices are better because they are better informed.
If all of this is true, why do men have more money set aside at retirement than women usually do? Very likely it is because men have more money to invest than women due because they make more than women do.
However, when it comes to investing, imagine combining the things women investors do differently from men with a larger initial investment. Put these together and there’s no telling what women can do.
Kayla is a personal finance blogger in her mid-20s who loves to write about money topics of all kinds.