Gender Differences When Investing In Stocks

Published by Linda Brown on

This article will address the gender differences between men and women when investing in stocks.  Numerous studies have documented the fact that men and women have totally different investment styles.

Men tend to trade stocks more than women and in the process racking up investment costs.  One study by Brad Barber and Terrance Odean of the University of California “found that men traded their stocks 45% more than women!”  This excessive trading in turn only served to reduce men’s net returns.  

In addition, studies have shown that women shun risk more than their male counterparts.  Men will definitely expose themselves to more risks.  They do this in search of higher returns.  Even though numerous studies have refuted this fact.  In fact, men merely ended up trading their profits away.  There is evidence that women are more conservative than men.  Women tend to choose “safer” stocks.    

Women also panic less than men during market downturns.  They will “stay put” during the chaos in the stock market, exercising patience and not touching their portfolios!   Men, on the other hand, many times, will panic and sell their stocks at the bottom of the market.  This often causes them to experience huge losses!

A “successful” long-term investor should possess the ability to remain calm and not make any rash decisions during market collapses.  This is, indeed, a difficult task for many investors!  It is not easy to see your portfolio in the “red.” This requires a great deal of patience and strength to stay the course. 

In addition, a study was performed on female versus male mutual fund managers.  The results of this study:  female managers were able to generate steady returns year after year.  Moreover, they achieved more “consistent” returns than male-managed funds.  A similar study saw these same differences when applied to hedge funds.  Once again, female-led hedge funds outperformed their male counterparts.

Moreover, women may be “less” optimistic than men.  They don’t just pay attention to information that is positive.  Women tend to be more pessimistic taking a more realistic approach when investing.  Both optimism and overconfidence can only serve to kill returns.  Whereas, with a bright outlook, it is easy to assume that only the best can happen to your stocks.

Another difference between male and female investors comes into play with peer pressure.  Women are not as swayed by peer pressure as men.  Men, when being observed by other men,  tend to make riskier decisions.  Many do this to compete with other men in their attempt to win.  Men want to dominate their decisions.  Women, on the other hand, choose the same route no matter who is observing them.  Women do not try to outdo one another.

In conclusion, we see that there are many differences in the way women and men invest in stocks.  We can clearly observe that women have a totally different approach to investing in stocks than men do!  Women tend to trade less, shun risk more, are less optimistic, and are not as likely as men to succumb to peer pressure.  And, the majority of the time these great female qualities can allow women to obtain higher returns than her male counterpart. 

Linda Brown

I'm an Accountant, Blogger & Investment Consultant with a "Bachelor of Business Administration"degree. Teaching women how to invest in stocks successfully! Men welcome!