Research shows women make better long-term investments than men, here is why
When it comes to money and finance, women have suffered the most forms of stereotyping. From the general belief that women are more thrift happy and are terrible at making money, to the allegation that they are bad with investment choices, the list is quite exhaustive.
But recent research has cast serious aspersions on the latter allegation. According to reports from Forbes, the University of California and the British financial services provider, Hargreaves Lansdown, women are actually the smarter investors and are more likely to generate more returns from their investments in the long term than men.
On average, women generate at least 25% more returns on their investment than men. The average return on stocks, for instance, is 7%. But that figure is mostly for the menfolk as research indicates women are actually more likely to accrue 7.8% returns from the same investment instead.
While this may not be very significant in the short term, in the long run, however, women would make significantly more money than their male counterparts. Founder of the women welfare organisation, Yoppie, Daniella Peri puts it in more perspective thus:
“If the average male and female investor were given £10,000 it means that a 7% increase for the average male would see a return of £10,700 after the first year. However, for the average female investor, this return would sit at £10,780.”
“Not a huge difference but when viewed over a long term period of 30 years, the difference becomes far more significant, with the average female investor seeing a return of £95,184, 25% more than the £76,123 seen by the average male investor,” she concludes.
So guys, don’t be surprised if your wife or sister or even your mum has more money to spend. She very likely had earned it through some really smart investment.
But why exactly is this so? What makes women better investors? The reasons are not very far-fetched as they are the same reasons we always, very wrongfully thought women made bad investors in the first place.
You thought women weren’t cut out for rigorous financial planning, didn’t you? Well, while women may generally not have that kind of flair, they certainly do tend to plan very differently from men.
According to the research, while male investors are more likely to focus more on investment performance and make decisions based on those, in contrast, women investors build financial plans and invest based on their life goals with their family at the forefront. This naturally places their focus on the long term.
While male investors make more knee jerk decisions during fluctuating market conditions, women are more conservative and hold onto their stocks for longer.
Low penchant for risk-taking
I’m pretty sure we have all heard of the saying; the higher the risk, the higher the returns. Well, I like to inform you that women don’t care much about all of that. While investment might be all about taking risks and bearing the consequences, women want to be as safe as possible by keeping the risk as low as possible.
As such, women tend to opt for diversification over high-risk investments.
“This prevents women from chasing ‘hot’ tips and trading on whims, behaviour that tends to weaken men’s portfolios,”Marissa Greco, Financial Planner at Greco-Nader Wealth Navigation
Thus, while men are mostly looking for the high-risk-high-reward opportunities which sometimes forces them to punch way and above their weight class, women are generally playing safe and keeping it simple. They are moving at their own pace and it’s paying off.
Patience is not a man’s game. Instant result, on the other hand, is what men are generally delighted with. While this makes them very good impact investors say on Forex and cryptos, it makes them poor investors in long-term instruments like stocks etc.
Women demonstrate a far greater level of patience when investing compared to men and research has shown that men are 35% more likely to make trades. However, this patience can often pay off in the long-term for female investors and provides a more consistent rate of return.
The patient dog gets the best bone. The patient woman gets the fattest cheque. No caps.
Research and Guidance
You think for women going about seeking help and guidance, especially in matters such as investments, probably means they don’t have a clue about such matters, don’t you? While that may be true, by the time they are done running around, they would have gathered as much information from different perspectives, to help them arrive at more reasonable investment choices.
If that doesn’t help, they are more likely to spend time researching or seeking the help of professionals.
“Women are more open to help from external sources. Female investors spend far more time researching their choice of investment and are thought to be twice as likely to seek external help from a financial professional.”
A woman investor probably has the combined experiences of the 10 men he talked to. If she doesn’t, she has probably sought and obtained the help of a professional. As such, she’s going into that investment armed with as much insight as she could possibly get.
While it is no secret that men are generally more aggressive when it comes to investment and financial matters, while there’s no secret that men are more dominant in that space, this research shows that average women possess qualities that make them cash out of their investments more than average men in the long run.
That is not to say men have the wrong approach to investing. Far from it. However, while men have the perfect approach to investments aimed at more instantaneous returns, women’s approach are generally more suited for the long-term.
As Daniella Peri says, “when it comes to investing, there’s no real right or wrong approach but a number of studies have found that many of the traits and approaches shown by women pay off in the long term.”
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