Women are poor investment managers??
There is no need for fathers, mothers, and children to confront this question head-on. It is divisive. Yet regardless where gender generalizations bend or incline in the family, people believe that men and women have differences in their attitudes toward money; that they see investment propositions in different lights, and that they may have many things to learn from one another.
An independent study by investment think-tank NAB Asset Management raised hints that women are poor investment managers, and that either avoidance or hesitation has been their usual response when asked to choose between depositing savings in the bank and buying stocks in a company, with the goal of making a profit, after a certain period.
“Australian women are missing out on tens of thousands of dollars in savings during their lifetime because of their tendency to shy away from taking appropriate levels of risk in their portfolio,” NAB portfolio specialist Kajanga Kulatunga remarked in, referring to women’s orientation toward money.
“We believe this is the first major study in Australia to demonstrate that women’s lower super balances are not only impacted by career breaks and lower pay, but also investment preferences,” he said.
Kulatunga’s opinion not only raised hackles in Australia but also renewed the nature-versus-nurture debate when he remarked about the differences in the thinking processes of the sexes, saying “Our research shows there are three regions of the brain that are anatomically different in men and women, which may have a major impact in financial decision-making.’’
While such prejudiced loyalty to one gender indeed struck a discordant note among women, there is a fair amount of research showing the calming effect of conservatism: men stand confident about investing; women are goal-oriented and have the tendency to trade less.
A study (“The gender face-off: Do female traders come out on top in terms of trading performance?”) by two PhD students, Wei Liu and Joakim Westerholm, from the University of Sydney, has raised the confidence bar in women’s favor. Co-authored by University of New South Wales Business School professor Peter Swan, it has become the most recent down-from-surface hypothesis supporting the view that women are good at profitmaking.
Observers believed that academicians are now playing the role of resurgent dragons – spitting fire to the ice-cold misconception that women are weak when it comes to investing. A different picture of their attitude on handling money was painted in Finland, where transparency of financial marketplace transactions has had remained untarnished in the last 17 years.
Trading data stands has gained world-class sophistication unique in Finland, where stringent stock exchange regulations require fool-proof identification for every trader, and where stockholdings and trade records are open to public scrutiny. By matching daily trade behavior among male and female investors in Nokia and other Finnish blue-chip stocks, researchers observed that female investors have had higher profit yield of $276.60 million (€194.17 million) in their portfolio, reflecting a consistently compounding ROI of 21.44% per year, with a 43.16% increase per year for the primary stock of Nokia alone.
Individually, women who have invested in stocks were outperforming other domestic and international institution-backed investors with €1,654.24 million in tangible profits.
“We concluded that female investors prefer to buy underpriced stocks and sell overpriced stocks – compared with moving average prices,” concludes Swan.
The UNSW research gives a resounding endorsement to a 2001 study called “Boys will be boys: Gender, overconfidence, and common stock investment,” from the University of California, which demonstrated that women investors exceeded the performance of their male counterparts by 1% a year, but attributed the letdown in effectiveness to excessive trading by males when trading costs were high and not because females have better choices of investment.
“Women are far more likely to buy when prices have fallen, indicating greater scepticism and contrarian behaviour than males,” Swan says, pointing that “men should make a special point of having their spouse review any choices the husbands make.”
The California study went as far as questioning the anatomical link between the sexes. Many researchers share the view that divergent investment preferences are less dictated by biology and more influenced by child-rearing and parenting actions at home.
Women were not tied to doing the investment themselves. Men were perceived to be earners; in most families they invested money. “So it’s a relatively recent trend; to borrow a line from the Eurythmics, “sisters are doing it for themselves,” said the report.
According to a report from Merrill Lynch, which conducted a survey after performing personality evaluations on 11,500 of its clients worldwide, women appeared to be on top of the investment pile than men. Up to 55% of the women respondents gave “agreed” or “strong agreed” as comment on the statement “I know less than the average investor about financial markets and investing in general.” About 27% said so for the same question, it said.
In universities and corporate offices, questions about diverse capacities between male and female capacities, such as “Do women lack confidence” or “Do men simply overestimate their own ability, leading to unnecessary risk-taking and poor investment decisions” permeate the air.
Many men tend to catch themselves up chasing after large profits, which might have led them to expecting faster returns, thereby raising their capacity for self-destruction.
While most critical remarks on male performance are mere generalizations, there are men and women who reject stereotypes. This refusal to abide by preconceived categories of behaviour reflect the reality that a person’s gender, educational attainment, career choices, family, and intelligence – and everything else about them as men and women – have no bearing as regard investing.
A successful investor creates a clear strategy for achieving goals, adopting discipline, obtaining the right education, and sharing expertise to colleagues and peers, regardless of gender.Read More →