Hey, boy, why can’t you in­vest like a girl?

Men dom­i­nate the fi­nance in­dus­try, but they’d do bet­ter at in­vest­ing if they learned a few lessons from the ladies.

Sunday News - - NEWS -

THE world of fi­nance is soaked in testos­terone. At the high­est level, Wall Street is ba­si­cally a gi­ant locker-room of blokes com­pet­ing to outdo one an­other, com­plete with chest-bumps and ter­ri­ble cologne.

If it’s mostly men who are drawn to the world of in­vest­ing, peo­ple tend to as­sume that’s be­cause they’re nat­u­rally bet­ter at it.

When multi­na­tional in­vest­ment firm Fidelity asked mil­lions of its clients how well they thought they’d done in the last year, only nine per cent of women reck­oned they would have out­per­formed the blokes.

Af­ter some num­ber-crunch­ing, the Fidelity an­a­lysts found the op­po­site was true. Women had not only earned an av­er­age of 0.4 per cent more than men, they’d done bet­ter over the last 10 years. That’s con­sis­tent with a grow­ing body of re­search which sug­gests women make bet­ter in­vestors, earn­ing up to 1 per cent higher an­nual re­turns.

It might not sound like a lot, but the com­pound­ing ef­fect makes a huge dif­fer­ence over the course of a life­time of in­vest­ing – we’re talk­ing an ex­tra quar­ter of a mil­lion bucks by the time an av­er­age Jane gets to re­tire­ment age.

This sug­gests women don’t need to be more ag­gres­sive if they want to play rough-and-tum­ble with the boys. In fact, a will­ing­ness to stand on the side­lines and take more of a pas­sive ap­proach is ex­actly what makes them more suc­cess­ful.

TRAD­ING IS FOR MUGS

A fa­mous study called ‘‘trad­ing is haz­ardous to your wealth’’ found that wheeler-deal­ers did far worse than those who sim­ply bought and held for the long term. Ev­ery trade cre­ates a win­ner and loser. Both the buyer and the seller think they’re get­ting a bar­gain, but only one will be proven right. By chance, you’d ex­pect to be wrong about half the time. In prac­tice, it’s worse than 50-50 odds, be­cause you’re get­ting charged bro­ker­age fees on ev­ery trade.

Nat­u­rally, men are more likely to be­lieve they’re smarter than ev­ery­one else in the mar­ket, and trade their port­fo­lios about 45 per cent more than women.

ASK­ING FOR HELPIf

you’re the the kind of per­son who would rather drive in cir­cles for hours than swal­low your pride and ask for di­rec­tions, you might not make a very good in­vestor.

A study by Wells Fargo found women were more likely to ask pro­fes­sion­als for help, with twice as many say­ing that what they needed most from a fi­nan­cial ad­vi­sor was ed­u­ca­tion about in­vest­ing prin­ci­ples and con­cepts.

SAV­ING MOREWomen

tend to save more of their pay checks, at ev­ery level of salary. This is cru­cial be­cause the key to in­vest­ing suc­cess is start­ing as early as pos­si­ble, and mak­ing reg­u­lar con­tri­bu­tions.

De­spite all of these good habits, women still tend to end up with less in their Ki­wiSaver ac­count than men. ANZ has cal­cu­lated the gap at $80,000, on av­er­age. That’s mostly be­cause women earn less in­come than men, for a va­ri­ety of rea­sons cov­ered last week, but there’s an­other fac­tor at play.

Schemes like Ki­wiSaver don’t have the temp­ta­tion of trad­ing in and out of stocks, which elim­i­nates the trad­ing penalty for men. Women might not be tak­ing enough risk in the in­vest­ment mix they choose, which would make this one area where they can learn from the blokes.

One of my big­gest bug­bears with Ki­wiSaver is that so many peo­ple are still sit­ting in the low-risk ‘‘de­fault’’ hold­ing pens. If you haven’t made a de­lib­er­ate choice, that in­ac­tion could cost you hun­dreds of thou­sands of dol­lars in fore­gone re­turns – check out Sorted’s Fund Fin­der to get a feel for the right scheme for you.

The per­fect in­vestor is care­ful, dis­ci­plined and recog­nises their own lim­i­ta­tions, rather than be­ing im­pul­sive and over­con­fi­dent. Af­ter learn­ing sev­eral lessons the hard way, I for one am proud to say I’m fi­nally start­ing to in­vest like a girl. Got a money ques­tion? Email Bud­get Buster at richard.mead­ows@thedeep­dish.org, or hit him up on Twit­ter at @Mead­owsRichard.

Women not only need to man­age their own fi­nances, they might well do a bet­ter job than the men.

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