Are Women Actually Better Investors?

For decades, the world of finance has been a Boys Club. From The Wolf of Wall Street archetype to the ‘stock market bf’ meme, there’s no denying that the cultural image of investment (and wealth more broadly) has traditionally been dominated by cisgender men. 

And there’s historical evidence pointing to why. 

In Australia, married women have only been allowed to work since 1966 when the Holt government abolished the “marriage bar”. The last democratic country to lift the ban, this law was created to prevent women from 'stealing' men’s jobs in the public service and to boost the national birth rate. Over in the US, single, widowed or divorced women had to bring a man into the bank to cosign credit applications as recently as 1974. 

While women were campaigning for equal rights and depending on their husbands, men were reaping the benefits of generational investments and an inherited financial education. 

As we progress further into the 21st century, however, more women are noticing the financial disparities that our grandmothers and mothers experienced and are wanting a slice of the pie ourselves. 

According to investing podcast You’re In Good Company, only 18% of online active investors in Australia are women. However research from UNSW that analysed 17 years' worth of investment trading found that women make better investors than men.

To explore why this might be the case, we spoke to Mandy Drake, the Chief Financial Officer at SelfWealth. The online investment platform — which has a female CEO and CFO at the helm despite investing still being a heavily male-dominated industry — gives users personalised money insights to help them on their financial journeys.

Speaking with Refinery29 Australia, Drake notes her observations on different genders’ investing approaches. 

“Women tend to be more calculated in their investment risk,” Drake says. “But the phrase here is ‘risk conscious’, not ‘risk averse’, because no investment is risk-free. Women opt for a rational, long-term approach.”

Professor Peter Swan, who co-authored the UNSW study says, “Women are far more likely to buy when prices have fallen, indicating greater scepticism and contrarian behaviour than males."

“Female investors prefer to buy under-priced stocks and sell overpriced stocks – compared with moving average prices," says Professor Swan. “It’s an investment strategy that over the long term, pays off.”

One reason that people can be turned off investing is the idea that it’s a form of gambling. "The notion of gambling comes from traders driven to buy stocks for the thrill," says Drake.

As Drake notes, no investment is without risk. However, due to women’s risk aversion, it’s more likely that women will “sit” on their investments for the long term rather than playing the stock market. 

The Quarterly Journal of Economics found that male investors traded nearly 50% more frequently than women. This increased their costs (you’re charged fees when moving money around the market) and lowered their returns. 

While both men and women can be susceptible to trading into losing stocks, the journal found that women did this at a “significantly” less frequent rate. 

With evidence to suggest that men take more risks than women in all aspects of life, it’s unsurprising that this translates to the world of investing. 

So once women are in the market, they’re more likely to make safer choices and invest for the future, and not gamble their hard-earned cash in a volatile bull market. 

"I think the reason women do this less comes back to research. Women research more, and the research says investing is a game in which you score higher the longer you play," says Drake.

Many women have, at some point in their lives, been told they’re “too emotional” and that men are considered level-headed, natural-born leaders. Ironically, the data shows that in the investing world, women tend to remain calmer during periods of stock market upheaval. 

Investment giant Vanguard found that male investors were “much more” likely to sell their portfolios at market lows like the Global Financial Crisis (which translates into lost dollars). However because women trade less in general, they’re more likely to hold onto their stocks even when numbers are dipping.

Similarly, an article by The New York Times noted that male investors tend to be “overconfident” while women are more likely to acknowledge when they don’t know something, whether it's financial jargon or about a type of stock. 

Drake agrees with this sentiment, telling Refinery29 Australia, “Emotional investors seldom win in the long term. It’s important for investors to do their research, think about the long term and stay level-headed when it comes to the small losses along the way.”

As more women take control of their financial futures, the CFO of SelfWealth shares what she wishes more of us knew about investing.

“It’s easy! There are so many ETFs out there that you don’t even need to pick stocks,” Drake tells Refinery29 Australia. “Just pick a basket of stocks in an industry you believe in, whether that’s companies that are environmentally friendly or run by women (both of which perform very well by the way) and get some skin in the game.”

Women are still far more likely to put their money into savings accounts, which have lower returns. But with the widening gender pay gap, the fact that we've borne the economic brunt of the pandemic and are still far more likely to undertake unpaid labour, there’s never been a more important time to gain financial education and invest for our futures. As Drake says, "The best time to invest is yesterday". Because as it turns out, we’re quite good at it.