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Women are better investors

28 Aug 2019

It’s official: Women get better returns. Here, the evidence from studies, plus reasons you really should be investing if South African and female.

The fraught and rather tired ‘battle of the sexes’ has many contention points, but investing isn’t one of them. Or is it? Despite the amount of testosterone on the Johannesburg Stock Exchange on any given day, the data proves that the fairer sex gets fairer returns time and time again.

The numbers prove that women are better

The idea that women might be better at investing than men first gained global traction two years ago, when US behemoth Fidelity Investments did a massive study in which it looked at over 8 million investment accounts of both genders to compare returns. Women’s investments won, earning 0.4% more than men annually. Extrapolated over a decades-long span before retirement, Fidelity theorised that this could mean a whopping $250,000 more in the bank.

If you think that Fidelity’s findings in 2017 were impressive, this year shows only more strident proof. A Financial Times article cited two studies a couple of month ago. It had this to say:

“Warwick Business School conducted a study of 2,800 UK men and women investing with Barclays’ Smart Investor, tracking their performance over three years. Not only did women outperform the FTSE 100 over the time period, they also achieved better returns. The men in Warwick’s study managed an average annual return 0.14% higher than the FTSE 100, but women outperformed the benchmark by 1.94%, beating men by 1.8%. A separate study by Hargreaves Lansdown also found women investors returning on average 0.81 per cent more than men over a three-year period.”

Why women have the edge

However, these are global figures. Is it the same thing locally? Senior Specialist: Financial Planning at Liberty, Daphne Rampersad, says, “Research shows that South African females tend to stick with investments, getting higher returns over the long term, while many male clients choose to switch when markets go south."

Also, the age-old risk profiling trick by asset managers and retirement annuities alike can work in women’s favour. Men typically pick portfolios overweight in equities and, despite the long-term benefits of equities over other asset classes in most markets, ladies’ better diversification wins over time. And probably also short-term too, now, considering the poor run of South Africa’s equities over the last five years.

“Men tend to favour new, untested shares, whereas women will stick with tried-and-trusted, recognisable names”, says HSBC private bank. Unsurprisingly, this also often results in women getting more tried-and-trusted, recognisable results than male investors, thanks to habitually sticking with a ‘sure thing’.

All in all, various natural traits make women great investors. This is exceptionally good news for South Africa, which is statistically made up of more young women than any other demographic and comes from households that are more than 60% headed by single mothers. However, women are still not investing as much as their male counterparts, even though they clearly should be.

The most compelling barrier to women investing, which seems to be a global phenomenon, is internal says Rampersad, “It is also perhaps a lack of confidence when it comes to starting to invest. There are many reasons for this which include the possible guilt experienced in investing in our financial wellness rather than putting our kids and/or financial dependants' needs before our own."

How to start investing as a woman

“A great place to begin is by critically looking at your budget spend,” advises Rampersad, herself a senior financial specialist. “Use the ‘50/30/20% rule’. The percentage of your income that goes towards living expenses like school fees, paying mandatory bills etc. should be 50%, shopping, eating out and other needs should cost 30% and 20% goes to savings vehicles like retirement annuities, unit trusts, tax free savings, or investments. This is just a basic rule and a great starting point.”

Also, in their favour is women’s famed ability to ask for directions. “Never discount the importance of selecting a suitable and accredited financial adviser that can articulate, prioritise and action your short term and long-term goals. For an investor that lacks confidence or background it is fundamental that professional advice is sought, perhaps not with the day to day decisions but with the longer term, significant financial matters. This is vital for efficient financial planning to take place and be maintained.”

Liberty Group Limited is a Registered Long-Term Insurer and an Authorised Financial Services Provider (FAIS nr 2409)

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Liberty Group Limited (Reg. no 1957/002788/06) is a licensed Insurer and an Authorised Financial Services Provider (no 2409).