Are Women BETTER Investors Than Men? Ep #4

Who’s the better investor: men or women? What is the difference between men and women? What makes one gender the better investor? In this episode of Retirement Made Easy, I share three different studies that all come to the same conclusion. You’ll get my answer to this dangerous question: Are women better investors than men?  

You will want to hear this episode if you are interested in…

  • [1:45] Setting the record straight: who’s the better investor?
  • [2:52] Study #1: The Cal-Berkeley “Boys will be Boys” Study
  • [4:28] Study #2: The Warwick Business School Study
  • [5:24] Study #3: The Fidelity Survey of 8 Million Investment Accounts
  • [8:25] The bottom line: What makes women better investors?
  • [12:50] What can we learn from these three studies?
  • [11:25] Men were 35% more likely to change their portfolio
  • [12:50] What can we learn from these studies?

What Cal-Berkely and the Warwick Business School tell us about men and women

The Cal-Berkeley study—Boys will be Boys: Gender, Overconfidence, and Common Stock Investment—took place between 1991–1997 in over 35,000 households. Researchers found that women’s investments outperformed men by almost 1% per year over 6 years. 

They also noted that men changed investment strategies 45% more than women did during that period. From my experience, the more you handle your long-term investments, the less they seem to grow—so that’s a strike against the men.

The Warwick Business School study was conducted from 2012–2016 and was composed of 2,500 different investors. This study found that women outperform men by 1.2% per year—almost identical findings to the Cal-Berkeley study. 

The ground-breaking Fidelity study

Fidelity is a huge brokerage firm—one of the largest 401k providers in the entire country. In 2017 they had around $6 Trillion in assets under administration. The Fidelity Survey of 8 Million Investment Accounts compared the success that women found in their returns versus men. They took their study one step further than the others: They analyzed why the behavior of women allowed them to reap higher returns. 

The amount of data is absolutely astonishing. The results they found were nearly identical to the previous studies. Interestingly, only 9% of women thought their investments outperformed men (whereas men were far more confident). It also found that women saved an average of 9% of their paychecks compared to an average of 8.6% saved by male counterparts. 

During the study period, the women averaged a 6.4% annual return. The men only averaged a 6% return. It’s only a half a percent difference—but that can make a HUGE difference when it comes to a lifetime of investing. 

What makes women better investors? 

The women in the 3 studies saved more, had a more diversified portfolio, kept a long-term focus, and didn’t make emotional decisions with their portfolio. Conversely, men were more short-term focused, took more risk in concentrated positions, and were more likely to be overconfident in their ability to actively manage a portfolio. This led to over-trading and higher transaction costs.

Another factor? How each gender response to momentum swings in the market. Every investor reacts differently to losses or gains. But the overconfident investor—AKA men—buy more when things look good but sell more in tough times. Men are simply more vulnerable to impulsive behavior. 

In my experience, every successful investor acts on a long-term plan. Failed investors react to current events in the economy or every scare in the market. They lose their long-term focus and let their emotions get the better of them. 

The bottom-line? Women really are better investors than men—but we can learn from their behavior. Investing successfully takes the discipline to save, patience to let time work for you, and a commitment to stick with your plan. Listen to the whole episode for all the details!

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