There is no doubt about it. Research proves that women and wealth are a better match than men and money. Women are simply better investors than men. Professors Brad Barber and Terrance Odean published a paper a few years ago that found women less likely to be overconfident when it comes to investing. As a result, they trade less often and that in turn increases investment results.
What is the downside for men?
Odean and Barber found that men earn about 1% less per year compared to women because of their undisciplined trading. And when it comes to bachelors and bachelorettes the problem is even worse. According to the Journal of Economics, single men trade 67% more than single women. That reduces their returns by 1.44% year.
Why is trading more frequently a problem?
The Investor’s Business Daily speculates that men are overconfident traders. They wrote that men who are successful in their careers often become overly optimistic. Many times that optimism spills over to investing. As a result they allow their feelings and “gut” to guide their investments. When this happens their investment strategy and discipline go out the window – along with their returns.
What you can learn from this?
It doesn’t really matter if you are male or female. It pays to find an investment strategy that fits your needs and emotional make up, and then stick to that strategy. Rather than convince yourself “it’s different this time” or “this stock has simply got to ________”, keep in mind that you truly can’t predict the future. Don’t speculate.
Why do I keep bringing this up?
My experience tells me that there are many people out there who continually override their own investment rules (or investment manager) to their own detriment. Just because you think you know what’s going to happen to the price of:
- Facebook Shares
- Apple shares
……realize that you don’t.
What has been your experience? Are you a better investor than your spouse/partner? Why? Why not?