Invest like a woman: how do “feminine” traits improve your portfolio performance?



Jan 7, 2023

Men are from Mars, women are from Venus…

What if we applied this idea to investing? Women have traditionally played a more conservative role when it comes to investing and creating portfolios, but that does not mean their approach is any less successful. In fact, studies have strongly suggested that women tend to employ certain “feminine” traits to their advantage with investing that can help improve portfolio performance. I dive into a few of them here.

Long-term focus 🔎

Investing for the long term is a key trait for any successful investor, and women tend to be especially well-suited for it. Women are more likely to invest for the long term, and are less likely to engage in risky activity such as day trading or speculative investments. This strategy of long-term investing helps to minimise losses and maximise gains.

Detail-oriented approach 💻

Women tend to dive more into details while evaluating whether they should invest in something, and thus tend to stay away from things they don’t fully understand. They are more likely to study an investment in depth and think through their decisions' consequences – and less likely to be swayed by hot stock tips. There’s more scenario planning and research, which is a great thing when it comes to deciding where and how to allocate your money!

Patience and discipline 🧘🏽‍♀️

Women tend to be very patient when it comes to investing. This is advantageous because it means they don’t get easily swayed by the promise of ‘get rich quick’ schemes or other rash decisions based on emotions. Taking the time to analyse investments, weigh risks and rewards, and then make an informed decision is a winning strategy. Warren Buffett has always said that it’s temperament--not intellect--that makes you a great long-term investor.

Being risk aware 🔼

When you ask anyone about how women invest, you are likely to hear the words “risk averse”. While this is not necessarily a bad thing, the reality is that women are more risk “aware”. We’ve seen time and again that women are willing to take risks, but only once they are equipped with adequate knowledge and information, and deeply understand the risks associated with their investments.

Less overconfidence bias 🔽

A common bias studied in behavioural finance, overconfidence, is the tendency of human beings to overestimate their skills, knowledge, and abilities. Thinking that you’re better than average may lead you to making poor decisions. We commonly hear of investors trying to beat the market, and/or ignore expert advice – which is often a result of overconfidence. Studies have shown that women are significantly less likely to fall into this trap than men. This is because women are more cautious when it comes to investing, and are not as prone to take large risks without sound reasoning.

Tldr 📝

Women have certain traits that can be extremely beneficial when it comes to investing, such as long-term focus, detail orientation, patience, risk awareness and being less prone to overconfidence bias. These are all essential components of a successful investing strategy, and can help to improve your portfolio’s long-term performance. It comes as no surprise that a 2021 study of 5 million customers by Fidelity found that women’s portfolios outperformed those of men by 40 basis points, on average.

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