Women might be better investors than men. Various studies around the globe comparing investment account returns for both men and women put women on top.1 Why is this? Putting women on the household investment podium doesn't make sense to a lot of men. After all, the fairer sex isn't as likely to gather around the water coolers at work, talking up the latest hot stock or mutual fund. They're not as likely to be drooling over CNBC's Becky Quick as she and her co-hosts spout off about stocks, the economy, and the markets on a daily basis. How can women's investment results beat men's results if there are fewer women taking advantage of all the ever-changing information out there?
Finance professors Brad Barber and Terrance Odean suggest that women's investment returns beat men's returns, on average, by roughly one percentage point annually because they trade less frequently, take fewer risks, and expect lower returns, according to a 2009 article by Jason Zweig in The Wall Street Journal.2 Overconfidence, it appears, might be more of a male trait than a female's.
When I've given seminars on indexed investing, many of the women learn to put together a diversified portfolio of indexes. But what has been the greatest risk to their indexed accounts, from what I've seen? Their husbands.
Men more often run the risk of imploding their investment accounts, of chasing get-rich-quick stocks, of trying to second-guess ...