Gut vs. Brain

Are Women Better Investors?

There are substantial differences in the way men and women trade. Find out who is better equipped for the roller-coaster

Today we find more and more women in key positions of the economy and financial markets, even though the prevailing view is that trade in the capital market is dominated by men.

The change started in the past decade, and recent research shows that women are better than men in the field of trade and investment. Qualities such as patience, care and long-term vision are the reasons why women can and will become better investors.

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The majority of women do not trade.

It is estimated that division of the sexes on the stock market is 5% female and 95% male.

A survey conducted by a major international research firm examines the differences between the sexes when it comes to knowledge and confidence in the investment field.

The survey covered 2,000 households and found that 55% of women claimed to have little or no knowledge in the area of investments and capital markets. 42% said they have some knowledge, while only 3% of women said that they were fully confident of their knowledge on the subject.

We can learn from this that the first barrier for women is simply a lack of professional knowledge, or interest in a traditionally ‘masculine’ arena.

So in a fair fight- if women represented 50% of all investors- we’d expect to see better results from women.

On the other hand, a different survey that was taken last summer talks about 326 investment bank interns that traded on a trading simulation software. Their results were combined with previous results from approximately 400 trading juniors. The junior traders lost money – this is standard. But the results showed that female traders lost less money than men.

They also showed that men were far more likely to transgress specified trading limits.

Is it true that women do not know how to manage their investments? Not at all- the opposite is true.

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Studies comparing yields of investment managed by women compared to men, showed that brokers of ‘the fairer sex’ achieved higher results than their male colleagues.

So in a fair fight- if women represented 50% of all investors- we’d expect to see better results from women.

What are the benefits of women in stock market investments and trading?

Another study (by Merrill Lynch) found that there are substantial differences in the way men and women invest. The survey shows that the majority of men suffer from impatience, greed and excessive confidence, and especially ego. By contrast, women tend to be much more patient and deliberate. They were better at considering risks and investments and, of course, at avoiding rash investment decisions.

Comprehensive research held by the University of Berkeley in 35,000 households confirmed these claims and found that men tend to have a surplus of confidence regarding investment and therefore perform more trades, causing significant erosion of their annual returns.

According to estimates of market factors, investment channels do not change dramatically by gender but investment patterns do.

Gut vs. Brain

While male traders tend to use their ‘gut’ rather than their head, female traders tend to carefully manage emotions and act more professionally. Men will certainly put their ego first and sometimes they will fight market trends unnecessarily just on principle. Women cultivate and maintain positions, they will give them extra attention. Also, some women are well known to be risk avoiders, and therefore they carefully consider their steps before trading.

In the following year, I’ll be happy to see more women taking the lead in financial markets, investments and key positions.

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