Move over Wall Street wolves, women are winning investment’s battle of the sexes

 
Clare Francis
A South Korean woman talks over her phon
Women are less susceptible to “lottery style” investing – but don’t confuse that with timidity or caution (Source: Getty)

Anyone with even a passing knowledge of the stock market could be forgiven for thinking that it is a strident, bullish, and dare I say masculine environment.

Think of images of trading floors – there’s rarely a woman in sight – or of Leonardo DiCaprio in The Wolf of Wall Street and Damian Lewis in Billions.

This perception is probably one of the reasons why I, in my job of educating people about investing, still come up against the view that “investing isn’t for women”. However, the reality is quite different. In fact, new research reveals that the women who do invest tend to outperform their male counterparts.

Read more: Research suggests that women are leading the market for crypto investment

We tracked the performance of 2,800 customers of Barclays’ Smart Investor trading platform over a three-year period, and found that female investors achieved average annual returns on their investment portfolios that were 1.8 per cent higher than the men.

Female investors also outperformed the FTSE 100 itself by 1.94 per cent, while male investors only beat it by an average of 0.14 per cent.

The research was carried out by Professor Neil Stewart, behavioural scientist at Warwick Business School. He analysed the trading patterns and portfolio performance of these customers, backed up with detailed questioning to uncover why they invested the way they did.

There were significant gender differences in things like the amount of money held, the length of time investments were kept, and trading frequency. For example, women traded an average of nine times a year, compared to 13 times for men.

The kicker was the male investor’s penchant for “lottery style” investing – putting money in more speculative and lower-priced shares in the belief that they had the greatest potential to increase significantly in value. Men were also more likely to keep hold of their worst performing shares in the belief that they would eventually come good, while selling off those shares that were actually performing well and making money.

This is common behaviour. Stewart explains: “If you have ever watched a bad movie to the end, you are having trouble letting go of a loss. If you have ever bought a lottery ticket, you have been attracted to big wins, but wins that are very unlikely.”

In contrast to men who seemed more attracted to the thrill of investing, women were less susceptible to this behaviour – but don’t confuse that with timidity or caution.

Stewart’s analysis reveals that women hold onto their investments for longer, so rather than trying to time the market to capitalise on short-term movements – when there’s a high chance of getting it wrong – they are more likely to commit money for the longer term and ride out periods of volatility.

Much as it’s fun to use this research to subvert (or, indeed, reinforce) gender stereotypes, it actually provides us with valuable insight about the role investing can play in modern financial planning.

As savers search for ways of maximising their money in a historically low-rate environment, this analysis shows that investing is an accessible and viable option for those looking to improve their savings over the long term.

You don’t need to be a Wall Street whizz to invest. As the adage goes, it’s time in the market, not timing the market that is most important. And that’s a lesson women seem to have caught on to more than men.

Read more: Research suggests that women are leading the market for crypto investment

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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