Just when you thought the whole Venus versus Mars divide was getting tired, along comes new research that highlights gender differences—this time, in the world of investing.
The big surprise, however, is that the way women approach investing actually works in their favor.
According to BlackRock investment strategist Nelli Oster, there are three main ways in which women differ from men. First, women tend to view their investing with a longer-term, non-monetary goal in mind—namely, financial security, independence and quality of life.
Second, they tend to take more time to research their investments and seek out the advice of others before taking the plunge in their portfolios. Men, on the other hand, prefer independent decision-making and make more impulsive decisions in response to the market. A Vanguard study, for example, found that women were less likely than men to abandon equities during the 2008 to 2009 financial crisis.
Third, women are more receptive to professional financial advice, spending more time with their advisers and—as a result—having longer lasting relationships with them.
It turns out that being a thoughtful, patient investor pays off, reports USA Today. A famous six-year study by finance professors Brad Barber and Terrance Odean, for instance, found that men trade 45% more than women. All this trading activity reduced their net returns by 2.65 percentage points a year. By contrast, trading reduced women’s net returns by 1.72 percentage points.
This more careful approach may also be why female hedge fund managers are beating overall industry benchmarks: A report by professional services firm Rothstein Kass found that a women’s hedge fund index returned 6% over the six and a half years ended June 2013, compared with the 4.2% gain of the S&P 500 and the 1.1% loss of an overall global hedge fund index. "Women simply perceive risk differently than men and tend to manage their portfolios accordingly,” Rothstein Kass director Meredith Jones told USA Today. “This results in less performance slippage, a diminished tendency to sell at the bottom, and a more consistent application of their strategies.”
Not everything about women’s investing styles yields positive results, however. For instance, when women are overly concerned about financial security, they may be too risk averse—but some level of risk is required to meet long-term goals and to outpace inflation, Oster writes.
When it comes down to it, "Both men and women should make sure that their investment styles and horizons match their overall financial goals,” she adds. “For women, this may mean taking on more risk. For men, this may mean focusing more on longer-horizon goals, rather than on short-term trading track records."