About two weeks ago, the world celebrated International Women’s Day. Sad to note that the gender still has a long way to go. After this long while, they still earn 23 percent less than men globally, occupy only 24 percent of parliamentary seats worldwide and that today, not one country can claim to have achieved gender equality.
Nevertheless, one area that women are outshining men is in investments. Studies show that women’s investing outcomes are often better than men’s for the very reason that they tend to trade less frequently and make fewer mistakes.
It has been shown that women are more likely to make money in the market, mostly because they didn’t take as many risks. They bought and held. Women trade this way because they aren’t as confident — or perhaps as overconfident — as men. In other words, women are more conservative and long-term oriented — two traits critical for investment success.
Research in behavioural economics supports this understanding. That a man’s portfolio would be a lot better off if it’s tailored to that of a woman. It’s a fact that men trade more, and the more they trade, typically the more they lose — not to mention running up transaction costs.
It’s true that men tend to hold on their loses a lot longer than women (it’s a macho thing not to accept you are wrong). Women, on the other hand, are loss averse, more emotionally unattached and are far quicker to unload losers.
Even science has a say in this. Women produce just 10 percent of testosterone of men, so they are less likely to be carried away in risky bets. Believe or not, the takeaway for men here is simple; be confident but not overly confident.
Take a long-term strategy and avoid distractions in the form of short-term
For women, more of them should take a greater interest in investing. Good to note that women investors are increasing at the local bourse. Latest Quarterly Market Statistics by the Capital Market Authority (CMA) reveal that the number of women investors at the Nairobi Securities Exchange (NSE) increased by six percent in the six months ending in Q3, 2021 — slightly better growth than men.
The current number now stands at about 600,000 and altogether accounts for a third of the total number of investors owing stock at the NSE. If we account for indirect holdings - total number owning stock though pension plans, insurance plans or mutual funds – their aggregate number would be way higher.
To add to this, there is a special need to intensify the effort to include more women in the market as professionals such as portfolio managers. Financial organizations should actively consider hiring more women for top management, otherwise, they risk passing over some of the nation’s most talented individuals.
It's obvious men need to learn from the women. Facts speak for themselves. Investing is a long game. Trading frequently doesn’t mean better results. It is the surest way to missing out on long-term growth.
The writer is MD, Canaan Capital