NEW! Our Hero’s Journey tool can help you with your next step towards financial freedom - click here to try now.
Advertiser Disclosure

Men vs women: who’s better at investing?

Men vs women: who’s better at investing?
Image source: Getty Images

The rules of smart investing are gender-neutral. That goes without saying. Yet, a growing number of studies have explored the ‘men vs women’ debate and show a significant difference in the way their investments perform.

Plot your path towards financial freedom with our Hero’s Journey tool!

MyWalletHero is here to help you learn about taking control of your money, whether that’s paying off debt, working towards a short-term money goal, or investing for your future.

This tool can help you understand the next steps on your journey – simply choose a goal that best describes your current interests to get started.

Does that mean that one gender is more adept or diligent in following the rules of good investing? When it comes to men vs women, who exactly is better at investing and why?

Let’s try to find out.

Men vs women: who wins at investing?

You may have heard that women are supposed to be better at managing money than men.

Well, when it comes to handling investments, it appears that there might be some evidence to back this saying. Several studies suggest that women are generally better at investing than men. 

A study by investment firm Fidelity that analysed more than eight million customer accounts found that women performed better on their investments than men by 0.4%. At first glance, that might not seem like much.  But over time, 0.4% can have a huge impact.

Another study from Warwick Business School involving 2,800 investors found an even bigger performance gap between the two genders over a three-year period.

While the annual returns on investments for men averaged 0.14% above the performance of the FTSE 100, women beat the index by a respectable 1.94%. In a nutshell, women’s returns from investments outperformed those of men by 1.8%.

Why are women better at investing than men?

As it turns out, the better investing performance of women is not down to mere luck.

The real reason is that men and women have different strengths and weaknesses that often translate into different investing approaches.

More often than not, it’s the approaches of women that tend to yield better returns, suggesting that men can perhaps learn a thing or two from women.

The different investing approaches of men vs women can be summarised under four headings.

1. Investing goals

Research indicates that women generally trade their shares less than men (nearly half (49%) as frequently according to a report by HSBC Private Banking).

Compare stocks and shares ISAs

If you’re planning to open a stocks and shares ISA, choosing the right platform is important. To help you narrow down the choices, we’ve created a list of some of the top stocks and shares ISAs.

This is attributed to the fact that men tend to focus on short-term portfolio performance, which often leads to impulsive and frequent trading. More frequent trading means more brokers’ fees, commissions and other expenses.

On the other hand, women tend to be focused on the longer term. They hold onto their investments for longer, riding out the ups and downs. They are less likely than men to sell during times of uncertainty.

2. Risk appetite

Women adopt a more conservative approach, focusing on tested and trusted shares with a good track record. Men tend to be more speculative, taking more risky positions, including investing in new and untested shares.

3. Research

Men do less research than women and are often more independent and impulsive. Women research their investments comprehensively and also spend more time going over their decisions.

4. Attitude

Men tend to be more optimistic about their investment performance, which can lead to overconfidence and overestimation of their abilities. The ultimate result is a more aggressive and risky approach to investing.

Women tend to adopt a more pessimistic outlook, which often protects them from bad investment choices. The downside is that this can sometimes lead to missed opportunities.

What do these findings teach us?

Based on the above analysis of men vs women, some could say that men should start investing more like women.

On some level, this makes complete sense. For example, the prospects of successful wealth building through the stock market are much better with a long-term investing strategy than with short-term and speculative trading.

So, men could perhaps improve their investment returns by focusing on long-term investment rather than short-term portfolio performance which is often quite risky and unpredictable.

That being said, it’s important to note that there’s no right or wrong investment approach. No matter your gender, the most important thing is developing an investment strategy that’s based on your preferences and capabilities, and sticking with it.

If you are completely new to investing, take a look at our comprehensive guide to investing for useful tips and guidance on how to enter and navigate this world.

And if you are already well versed in investing, check out whether you could get more out of your investments with one of our top-rated stocks and shares ISAs with which all of your gains will be tax free.

Are you making these 3 common investing mistakes?

These all-too-common investing errors can cause you to miss out on the long-term wealth-building power that shares can hold….

To help you side-step these pitfalls, and move forward on your path to wealth-building, we’ve created a free report, “The 3 Worst Mistakes New Investors Make”.

Just enter you best email below for instant access to your free copy.

By checking this box and submitting your email address, you agree to MyWalletHero sending you emails with money tips, along with details of products and services that we think might interest you. You can unsubscribe from future emails at any time. You also consent to us processing your personal data in line with our privacy policy, and our cookie statement. For more information, including how we collect, store, and handle personal data, please read our Privacy Statement and Terms & Conditions.

Some offers on MyWalletHero are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.