February 10, 2010

Women Are Better at Investing

Do you think women or men are better at investing?   I found a number of studies that showed women performed better at investing then men.

Merrill Lynch did a survey report to compare  the investing habits of women and men.

The reports had the following paragraph:  "Women are far less likely than men to hold a losing investment too long (35% of women reported having done so at least once vs. 47% of men) or wait too long to sell a winning investment (28% vs. 43%). Men are also more likely than women to allocate too much to one investment (32% vs. 23%), buy a hot investment without doing any research (24% vs. 13%) and trade securities too often (12% vs. 5%)."

In various ways women made fewer mistakes than men in handling money.

The report goes on to say:  "Of men who reported buying a stock without doing any research, 63% said they did it again, whereas only 47% of women repeated the mistake. Nearly half (48%) of all women who waited too long to sell an investment did it again, but 61% of men repeated the mistake.  And among men who ignored the tax consequences of an investment decision, 68% did it more than once while only 47% of women did."

Not only did women make fewer mistakes they also learn from their mistakes and are a lot less likely to repeat them.

Another study reported on by the New York Times looked at the performance of women who ran hedge funds versus that of men who ran hedge funds.  The article says:

"BusinessWeek notes that according to the research, from January 2000 through May 31, 2009, hedge funds run by women delivered nearly double the investment performance of those managed by men.
On average, funds managed by women produced annual returns of 9 percent, compared with a 5.82 percent average annual return by funds run by men.
Furthermore, in 2008, during the height if the financial crisis, funds run by women were down 9.6 percent versus a a 19 percent decline in those run by men."

This survey found that :
"To wit, approximately half the men surveyed (49 percent this year and 53 percent last year) viewed themselves as the primary financial decision maker, compared to only 12 percent of women this year and 13 percent last year.
- Not surprisingly, eight in 10 women (83 percent) felt it was important that both partners should contribute to household finances, compared to only six in 10 men (65 percent)."

Of course these are just generalizations.    Individual men and women won't necessarily follow the trends and there can of course be men who are better than women and vice versa.

So whats the point of this?   For some of us its just an interesting report.   But for some people this might help us improve our own finances.    If you had previously assumed men were better at investing then this data should make you reconsider.   I think women should have more confidence in their investing instincts and some men should trust the opinions of women a little more.

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