Women Make Better Investors Than Men
Several studies suggest that women generally exhibit certain behaviours that make them better investors than men. Analysis of 2,800 investors conducted by Warwick University found that not only did average female investors outperform the FTSE 100 over the last three years but they also outshone their male counterparts. While annual returns on investments for then men in the study were on average a marginal 0.14 per cent above the performance of the FTSE 100, annual returns on the investment portfolios held by women were 1.94 per cent above it. This means returns for women investing outperformed men by 1.8 per cent. A Hargreaves Lansdown study painted a similar picture with women outperforming men by 0.81% over a 3 year period.
Interestingly, a study by Baber and Odean titled ‘Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment’ found men in general earned 1% less than women per year in their stock picking. But, single men underperformed single women by 1.44%. Does this indicate that being accountable to a female spouse made married men better investors than single men?
There is no one attribute or inherent knowledge that can consistently led to outperformance, but rather a combination of behavioural traits that tilt the scales in favour of women.
Trading Frequency
According to research from Warwick University, women tend to trade less frequently than men in the order of 9 trades per year versus 13 by men. This is confirmed by online broker Hargreaves Lansdown have reported that women traded 49% less frequently than men.This has a couple of key advantages. Reduced transaction costs and fees is a benefit as these eat into returns over time. A lower trading frequency also indicates a longer term investment perspective which sees women better abe to ‘ride out’ short term volatility and avoid financial loss. Baber and Odean also described this in their study: “Men trade 45 percent more than women. Trading reduces men’s net returns by 2.65 percentage points per year as opposed to 1.72 percentage points for women. This difference is due to greater overconfidence among men.”
Diversification
Women tend to build more diversified portfolios, spreading their risk between individual assets, sectors and asset classes resulting in smoother returns. They were more likely to opt for funds with consistent track records as opposed to opt for the volatility that of a potential but unlikely big win on individual stocks. Dr Daniel Crosby highlights in his book ‘The Laws of Wealth’ that women are not necessarily risk-averse but are more deliberate in assessing risk and tend to take a more measured approach to investing.This results in portfolios that are more diversified and aligned with long-term goals rather than short-term speculation.
Cautious Approach
Women are less likely to chase “hot stocks” or invest in highly speculative ventures. They tend to favor established companies and investments with a proven track record. This cautious approach can help protect their portfolios from significant losses during market downturns. A 2021 Robinhood survey found that women were less interested in cryptocurrency investments compared to men, highlighting their tendency to avoid highly speculative assets. Similar results also came from a Blackrock study, where 72% of women rejected riskier investment selections as opposed to just 59% of men.
Seeking Advice and Education
Women are more likely to seek knowledge from others and more open to professional advice and educating themselves about investing. Dr Daniel Crosby’s book suggests that unlike men who often exhibit overconfidence on their own abilities, women are more likely to seek professional advice, adhere to it and more likely to follow a structured investment strategy rather than reacting to market fluctuations.
To take this further with regard to the purpose of investing, women tend to prioritise financial security, retirement savings, spending needs and wealth preservation over beating a market benchmark. A long term, goal oriented approach leads to a more sustainable approach to investing as opposed to the hunt for short term profits.
Institutional Investors
It’s not just mere mortal retail investors either. Research on the performance of female hedge fund managers indicates that, despite their underrepresentation in the industry, they often achieve comparable or superior results compared to their male counterparts. An academic research paper by Gehde-Trapp and Klinger in 2022 found female fund managers tend to adopt less risky investment strategies, particularly during periods of negative market sentiment. This cautious approach does not compromise returns; studies have found that despite taking on lower unsystematic risk—about 50% less than male managers during stressful times—their performance remained on par with male managers. Overall, there was no real risk adjusted return difference, however male led funds had higher rates of survivorship. Funds managed by women face difficulties in attracting capital and subsequently higher closure rates. But of those who survive, female managed funds have been shown to outperform male led ones. Indicating those who can overcome industry hurdles possess a high degree of skill. Despite all these claims, only 13% of institutional portfolios had a female as lead or co-lead Portfolio Manager. Highlighting an opportunity for greater gender diversity in the institutional investment landscape.
With female investors and fund managers proving their ability to deliver strong returns despite barriers, there is clear space and demand not only for conversations addressing the gap but also for opportunities that drive real, lasting change toward a more equitable investment ecosystem. A clear testament to this shift is the rapid growth of brands like Female Invest and the Invest in Women Taskforce. In recent years, these platforms have attracted hundreds of thousands of women, fostering a powerful community and leading a meaningful change in the market.
How Middleton Private Capital can help
The Role of a Professional Investment Manager in enhancing your financial future: Whether you are an existing investor with a range of investments that could do better or new to saving and investing altogether, we can help you make more of your money.
Who do we Help?
Private Clients- High Net Worth individuals, business owners, retirees, and their families
Professional Clients- Institutional Investors, Pension Schemes, Independent Financial Advisers, and Accounting & Legal Professionals
If you are seeking investment advice and or a review or of your current portfolio, please get in touch and we will meet with you to see if we are a good fit.
Studies
Fidelity Warwick Business School https://www.wbs.ac.uk/news/are-women-better-investors-than-men/
Hargeaves Lansdown
Barber and Odean’s “Boys Will Be Boys” study https://faculty.haas.berkeley.edu/odean/papers/gender/boyswillbeboys.pdf
Dr. Daniel Crosby in his book, The Laws of Wealth
Monika Gehde-Trapp & Linda Klinger, ‘The Effect of Sentiment on Institutional Investors: A Gender Analysis’