The Financial Times Money Editor, for whom I used to write my weekly column, asked this week if women make better investors. The data suggests that not only do women make better investors, but investing in women gives better returns.
There can be little doubt about male dominance when only one out of a hundred of the UK’s largest companies are headed by a woman. Even in the US, it’s a similar proportion of women who head Fortune 500 companies.
Eighty per cent of women-owned businesses that need credit are under-served worldwide, creating a £1.3 trillion financing gap according to research last week. Also according to the Rose Review “only 13pc of people on UK investment teams are women and 48pc of investment teams have no women at all. This is reflected in the fact that less than 1pc of UK venture funding goes to all-female teams and just 4pc of deals.”
Not only does research show women run business do better, but also those with a more gender balanced board – basically on every metric it makes sense investing in women. But it doesn’t happen. So women have started their own funds, their own investor groups to invest in women led businesses.
How ironic. Research shows 46 per cent of all US businesses are owned by women, and employment at women-owned businesses is growing at 18 per cent, compared with 8 per cent for all companies, according to business magazine Forbes. Actually, US women have an average net worth of £1.96 billion compared with the men, at £1.45 billion.
And when it comes to investment, research also shows women make better investors than men. Women’s portfolios earned 1.4% annually more than men’s did in a study of over 35,000 investors by the University of California at Davis. Indeed, single women earned 2.3% annually more than single men.
Poor male performance is due to over-trading, according to the study. Men trade their accounts 45% more often than women. And single men shuffle their holdings 67% more than single women. Perhaps the adage about men’s fear of commitment is true after all.
A National Association of Investors Corporation ten-year study found all-female investment clubs outpaced all-male investment clubs by producing 23.8% average compounded lifetime annual returns compared to 19.2% for male clubs.
So what lessons are there for men? Fear of making a mistake was 50% to 60% higher among women than among males according to the US National Center for Women & Retirement Research. Consequently, women spend 40% more time than men researching and are also less likely to trade on a ‘hot tip’. Men need to reign in their overconfidence. 52% of men express confidence in their ability to invest wisely, compared to just 38% of women according to the American Savings Economic Council. Men are overconfident in their abilities to pick market beating stocks.
Alpesh Patel
