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September 25, 2022

Number of women investors rises: but are they outperforming men?

According to new research, the number of women investors is rising. So, how are their portfolios performing compared to those held by men? The post Number...
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New research reveals that the number of women investors is on the rise. The same research also reveals that women investors are outperforming their male counterparts.

So, what else did the research reveal? And are we likely to see even more women investors in future? Let’s take a look.

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What did the research reveal about women investors?

According to Westian Global, women investors are likely to hold 35% of the world’s investable wealth by 2023. The wealth management company came to this conclusion after highlighting data from 2020 that revealed women investors accounted for a third of global investable wealth in that year. This was up from 30% in 2016.

Overall, it’s expected that by next year, wealth held by women will equate to $7.4 trillion (£5.6 trillion). This compares to $13.8 trillion (£10.4 trillion) of wealth expected to be held by men.

The report also suggested that if female investor numbers catch up with those of men, then $3.2 trillion of extra capital will find its way to global stock markets. This is the reason why the report suggests wealth managers and other financial service providers may wish to start catering their products specifically towards woman investors.

What else did the research reveal?

Aside from highlighting the increasing number of women investors, the report also suggested that women are more likely than men to value a discussion with a professional adviser. 

The report suggests that eagerness among women investors to seek professional advice is probably down to the fact that women generally invest in order to achieve life goals.

In contrast, men are more likely to invest in order to ‘beat the market’ and score higher than average returns. As a result, it can be assumed that male investors following this approach are more likely to want to ‘go solo’, rather than discuss their ambitions with a professional adviser.

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Men vs women: which gender achieves higher returns?

In addition to highlighting behavioural differences between the genders, the report revealed that portfolios held by woman typically outperformed those held by men. On average, the report says women investors beat men by roughly 1.8% per year.

This finding aligns with similar research from the 2021 Women and Investing Study. The study also revealed that women investors outperform their male counterparts on average. However, the data suggested that women beat men by 0.4% per year rather than 1.8%.

One explanation as to why women investors usually beat men is because women investors typically make fewer trades. This is significant as every trade made in the stock market – either to buy or sell shares – attracts a fee. As a result, a strategy of limiting trades can cut the cost of investing and consequently boost returns.

Another reason why women investors outperform men is because women are seemingly less affected by ‘disposition bias.’ This refers to investors selling stocks after big falls in order to reduce the chances of suffering further falls. It’s widely agreed that such an investing strategy is flawed. That’s because it’s linked to ‘timing the market’ – a strategy many experienced investors would advise against. 

Put simply, trying to ‘time the market’ means you essentially believe that you know how stocks will perform in future. You assume that you have more knowledge than other investors. In reality, the opposite is true, as the market is typically one step ahead of retail investors.

While it’s possible to successfully ‘time the market’, it’s typically down to luck as much as anything else.  

Are you looking to invest? If so, it’s worth choosing a share dealing account with low fees. This is especially important if you plan to trade regularly, as high fees can eat into your returns.

The post Number of women investors rises: but are they outperforming men? appeared first on The Motley Fool UK.

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