This is an article about investing. It is not about diversity and inclusion and it is not about grievances and recriminations. It is not written in ignorance of the environment we find ourselves – whatever opinion you have on it.

Yet despite the focus on investing it is an article that is being published for International Women’s Day. This is not a coincidence and that has both inspired the tone and the subject matter. And it is within the lens of investing that I offer a simple message to male readers. We have a lot to learn from female investors.

Our warped view of investing success

What is the first image that comes to your mind when you picture a successful investor? Describe this successful investor. Is the successful investor confident? Daring? Aggressive? Comfortable with taking risk?

That is the popular portrayal of top investors. It also aligns with our gender stereotype of the alpha male. That is not to say that women are not portrayed as successful investors. But these women often take on alpha male characteristics.

There are several implications to this portrayal of success. It certainly impacts how many women choose to invest although significant progress has been made. The latest ASX survey shows that half of all people intending to invest are women.

It also impacts the investing approach of both genders. In this age of the alpha male and the finance bro I offer a different pathway for investing success. Let’s learn from each other and collectively become better investors.

What it takes to be a successful investor

There are many studies that women are less confident investors. Fair enough. I accept the validity of these studies. However, we can also reframe them. Women are more humble investors. And as I’ve previously written I think humility plays an underappreciated role in success.

A humble investor is intellectually curious, conducts thorough research and strives to increase their understanding.

A humble investor understands there is a limit to what anyone can know about any single investment and diversifies appropriately.

A humble investor seeks out a diverse set of opinions and thoughtfully considers opposing viewpoints.

A humble investor knows the world is not black and white but a series of greys and appreciates that the ‘answer’ is nuanced and not absolute.  

All of this contrasts with the contemporary portrayal of success and leadership that far too many people try to emulate. If you strive to confidently barrel through life in wilful ignorance while comfortably residing in an echo chamber of sycophantic ego stroking I have news for you. That will not lead to investing success.

Investing with humility  

My call for humility may seem like an empty platitude for some readers. And I understand it will likely fall on deaf ears in our current environment. But I also know that our audience at Morningstar is different from the general population.

My ask is to consider some data supporting my assertion. The headline stat that is always pulled out around International Women’s Day is that women are better investors than men. This comes from a study by Fidelity that showed in five million retail brokerage accounts women outperformed men by 0.4% a year over a decade.

The purpose of the repetition of this data is to encourage more women to invest. I think that is a worthwhile effort. Yet I know that most people reading this article are already investors. What matters to you is how to become a better investor. To do that we need to look beyond the headline and focus on what women do differently.   

In that spirit here are some facts that might help you reach your goals. A study from professors Barber and Odean at the University of California titled “Boys will be boys: Gender, overconfidence and common stock investment” uncovered that men trade 50% more than women.

And between 1991 and 1996 the individual investors that traded the most earned an annual return that was 6.5% lower than the overall share market according to another paper by Barber and Odean. Step one – trade less.  

Why do men trade more than women? According to the New York Times far more men than women try to make sense of short-term noise. The natural reaction to misinterpreting a useless bit of noise as a signal of what to come is to trade. Step two – focus on the long-term.

Overconfidence also impacts portfolio construction. According to the Fidelity study women diversify more by constructing well rounded portfolios. Men tend to overweight their portfolio in the riskiest assets.

I often make the case that the short-term volatility associated with riskier assets matters little over the long-term it turns out that men don’t tend to hold them for the long-term. Male investors sell shares more in down markets than women according to Vanguard. Step three – ignore volatility.

Perhaps that is because men are constantly checking their portfolio. An ASX study showed that 20 percent of men check their portfolio every day. Only 8 percent of women do. Women were also less likely to check on a weekly basis and 44 percent of women review investments only at least quarterly.

Checking your portfolio more often leads to more trading. Yet I will admit I look at my portfolio frequently. I’m ok with that because of the structure I put around my decision making including defined goals and a document investment strategy. Consequently, I almost never trade. Step four – put some structure around your decision making.

Final thoughts

All of us can control our behaviour. Yet the instinctual tendencies of each gender may push us in certain directions that will influence our outcomes. There is ample evidence to suggest the way women approach investing – with humility – leads to better outcomes.

I’m going to spend some time on International Women’s Day reflecting on what I can learn from the way women approach investing and life. Hopefully that will make me a better investor and person.

In that spirit I wanted to thank Shani, Sim and Leisa who are the three women I work with on our team. I’m incredibly lucky to work with them. I have learned so much from each of them and I’m thankful that Australian investors are able to benefit from their wisdom and guidance. I’m proud of what they’ve accomplished and who they are. Appreciating the wonderful women in our lives is the true spirit of International Women’s Day.

Happy to hear your thoughts at [email protected] 

Read Shani's great article on how women have fostered independence in difference cultures. 

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