When it comes to investing, there is a common perception that women tend to be more cautious and risk-averse than men. However, this stereotype is not just a social construct; it is backed up by research. Studies have found that women tend to make better long-term investors than men. In this blog post, we will explore some of the reasons why this is the case.
Women tend to be less impulsive than men and are less likely to engage in excessive trading. This patience allows them to hold onto their investments for the long term, which is crucial for achieving higher returns.
RISK AVERSION
By mere virtue of nature, women tend to be more risk-averse than men, i.e. they don't take on as much risk or engage in risk-seeking behaviour like men do.
Albeit risk is necessary to attain higher than average returns, excessive risk-taking is what leads to significant losses in the all-so-crucial long run. Female Portfolio Managers time and again, on average, have proved to put aside their personal ambitions to receive recognition for producing big, double-figure returns, and prioritise the conservative financial needs of the client, which are simply based on not losing any cash.
LONG-TERM FOCUSED
According to a survey by UBS, 61% of women seek out investment advice from professionals, compared to just 52% of men. Of the 52% of men, the majority of them look for advisors that can confirm their personal bias, not challenge it in a constructive way.
Being able to simply admit that you don't know everything is a great place to start for just about embarking on any kind of endeavour. It allows you to be open-minded and teachable. Of course, don't just listen to anyone. Find the best financial advisors you can out there, with experience and credentials that justify any big calls they make on how your money is going to be invested.
RESEARCH-ORIENTED
According to a study by the Center for Creative Leadership, demonstrating empathy is a critical leadership skill in attaining top corporate performance. Such empathy drives one's ability to not only really listen to a client or colleague, but to go deeper and research with an unbiased mindset.
It's funny, because empathy is seen generally, in particular within a toxic masculine point-of-view, as being weak. According to a study by Fidelity Investments, women's investment portfolios tend to outperform those of men by 0.4% annually. This may be because women are less likely to take unnecessary risks on behalf of their clients.
EMOTIONAL INTELLIGENCE
The gender-based cognitive and behavioral factors that come into play also powerfully impact one's ability to invest. According to a 'Global Investor Pulse' survey by BlackRock, women are more likely than men to stick to their long-term investment plans and avoid making impulsive decisions based on short-term market fluctuations.
Women have greater emotional intelligence of themselves, as they are able to identify honestly certain external triggers such as rising interest rates and falling stock prices, and immediately recognise the importance of maintaining a cool temperament.
Men on the other hand, well, as much of any culture's history will dictate, are known to be impulsive and over-confident. Now, this has its benefits of course, especially when a bit of aggression is needed. However, female Portfolio Managers have a greater poised balance between the need to act and the need to hold back in order to preserve cash earnings, and thus in the long-term earn higher returns.
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