As a female neurologist and financial adviser, I’ve learned that women have just the right mix of caution, willingness to learn, intuition and appreciation of their overall life goals to invest money well. The puzzle is, that in spite of these innate abilities, women often feel uncomfortable about investing their hard earned cash themselves. So, they delegate others, usually men, to the task. Then, they live with the results. The outcome is not always pretty, especially in a case of a bitter divorce, early widowhood or old age when a woman lacks resources due to someone else’s mismanagement.
Cutting edge research gives women reason to turn this common wisdom upside down. It indicates that women are strong investors, often as good or better than men. Recognizing that fact is important because it can gives today’s modern women just the boost she needs to take control of her own financial destiny. This is especially important today when women have made so many other gains in their lives.
INDIVIDUAL WOMEN INVESTORS MAKE MORE IN THE STOCK MARKET THAN MEN
In 2001, researchers Brad Barber and Terrance Odean at the University of California in Davis made the startling discovery that women make more than men in the stock market. They studied 35,000 households from a large discount brokerage firm between 1991 and 1997 and analyzed the results. Single women earned nearly three percent more in an annual risk-adjusted net return compared to single men. Married women earned a stock market annual risk-adjusted net return 1.4 percent more than married men. This finding was not due to small numbers or lack of expertise. The researchers examined 35,000 households over seven years. Barber and Odean are among the most respected economists in the country.
Professional Women Money Managers Excel Too
A separate study of male and female mutual fund managers conducted by investigators at the Center for Financial Research in Cologne, Germany (Ruenzi and Niessen, 2006) showed similar results. While the return of the two sexes was equal when risk was taken into account, the women also simultaneously stayed closer to the criteria mandated for their fund. They additionally traded stocks less often. These positive aspects of female management meant that the investors in women managed portfolios were better served in several ways: 1.) The investor portfolio was what the client thought it was; 2.) The investors trading costs were less. Ultimately, each of these features helps the client and means the women fund managers had a step up on men in a comparable position. This is why. Funds that remain true to style (as the women manager’s did) give the investor the opportunity to maintain his mix of funds in the way she/he designed them to be. If one fund is off target in terms of its goals (more men managers), it throws the portfolio investor off too. Additionally, less turnover of stocks, also found more in the female manager’s portfolios compared to the men’s, saved trading costs for the client.
SURVEYS SHOW WOMEN MAKE FEWER INVESTING MISTAKES THAN MEN
In a 2004 telephone survey of a thousand investors, divided equally between genders, Merrill Lynch investment managers concluded that women are better investors than men. “Women make fewer investment mistakes than men and make them less often -- despite the fact that, on average, they tend to know less about investing and enjoy investing less than men.” Women compared to men:
• Held losing investments for shorter periods
• Sold winning stocks in a timelier manner
• Were more diversified
• Were less likely to buy a hot investment without doing research
• Turned over their securities fewer times, and were less likely to repeat mistakes
Unleash Your Ability
These studies show that the gentler sex can invest their money well. If women can glean 1.5 to 3.0% more per year than a man (husband or financial manager) who invests their money, the compounded enhancement to a portfolio over ten or twenty years is dramatic. In addition, a significant other may be relieved that he is free of the responsibility plus a financial advisor won’t have to be paid. As importantly, the money you put into your pocket by self-investing is cash you didn’t have to work for in the traditional sense. What could be better?
Adapted from Shirley M. Mueller's article in The Indianapolis Business Journal, JULY 30, 2007
Gender and Money: Sex Matters - To learn more about this author, visit Shirley Mueller's Website.
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Shirley Mueller
(Visit Shirley's Website)
Shirley M Mueller turned every doctor's
fear - inability to invest his or her hard
earned money wisely - into her greatest
passion. While practicing medicine, she
handled seven family investment accounts.
When she retired from medicine in 1995,
she worked for seven years in the
investment industry. Now, she writes
regularly for Physician's Financial News,
a money management internet publication
directed at doctors. Dr. Mueller also
educates, both one on one and publicly,
about how to effectively self-invest using
a simple and effective three-step
approach. Recently she gave lectures
regarding this topic at Indiana/Purdue
University.
Mueller specializes in client-managed
investment portfolios for which she
provides unbiased information. She is not
associated with a firm for whom she has to
promote a party line. Her fee is hourly,
not a percentage of assets.
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