Women Better Investors Than Men
Updated March 31, 2020

3 Reasons Why Women Are Better Investors Than Men

Stocks

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Are women better investors than men?

The answer might surprise you.

Fidelity Investments actually did a client data analysis that showed, on average, women performed better than men at investing by 0.4%.

Other studies have shown the same.

Now, this is of course a study of how women and men have invested in a particular time and a particular place with a particular broker, i.e., in the past few years in the good ol’ U.S. of A with Fidelity.

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So we aren’t talking universal truths here, and there are obviously exceptions.

I actually have a girlfriend who invested her life savings in Bitcoin earlier this year, only to see the value cut in half.  And my husband is all about the “set it and forget it” strategy that women tend toward (more on that later).

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But it does hold that at least recently, female investors have outperformed male investors, at least in certain studies.

And in this article, we will examine 3 reasons why female investors tend to fare better than male investors.

1. Women Tend to Trade Less.

Terrance Odean, a professor at the University of California at Berkeley’s Haas School of Business, found that men trade 45% more than women!

And you know what investors have to pay every time they make a trade?

A commission to their broker.

And commissions can take a significant amount out of investors’ returns over the long run.

So naturally the group who tends to trade less — in this case, women — will have a huge head start over those who trade more — in this case, men.

Ally Invest is great because you can trade dividend stocks for as little as $3.95 per trade compared to $6.95 at E*TRADE and Charles Schwab.

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2. Women Tend to “Set It and Forget It.”

Believe it or not, “set it and forget it,” rather than frantically trying to beat the market, is by far the best strategy for the average investor.

See, the vast majority of professional stock pickers do not beat the market in any given year, much less routinely.

I’m not just talking about your college buddy who dumped his life savings into Snapchat stock. I’m talking about professional, well-paid money managers.

So the best investment strategy is actually to just invest so that your returns essentially mirror the stock market.  Check out our article How to Invest in the Stock Market for more on this.

And this happens to be the investment strategy that women employ more.  Women tend to simply plop their money into simple index funds, while men tend to trade more actively in an attempt to beat the market, which they rarely do.

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3. Women Tend to Take Less Risk.

So in their attempts to beat the market, men tend to employ far riskier investment strategies than women.

Now surely, some high-risk investors hit it big.

But far more absorb huge losses, thus reducing returns overall for the XY camp.

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What Explains These Behaviors?

So I’m not an endocrinologist or sociologist, but I do have some theories as to why women and men have different investing behaviors.

Hormones

Many would chalk up the differences in male and female investment behavior to hormones.

Men, see, have more testosterone, which disposes them toward more aggressive, high-risk, high-return behavior such as trying to beat the market.

And while I think this could definitely be the case, I think there is a more compelling case found in traditional gender roles.

Gender Norms

When I first met Logan, I was bewildered by how into personal finance, investing, and passive income he was.

Like, why does he care so much about whether or not he reaches his “passive income goals” or not?  And why didn’t I care so much?

Over the years, as I’ve thought through personal finance and had many conversations with friends, I’ve developed a theory why men tend to be more “into” financial things.

So hear me out here.

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Despite growing equality in the workplace, the expectation in many families (including ours) remains that eventually the female partner will take herself out of the workforce for some time to raise children, while the male partner will keep on working.

So I think that more men than women know they’re going to be working the rest of their lives and at some point be the sole breadwinner, and so they are more motivated to pursue things like passive income, which can morph into engaging in risky behaviors like get rich quick schemes.

Confidence

And of course, many studies have shown that men have more confidence than women.

So naturally the more confident group will engage in behaviors such as trying to beat the market since they trust their own abilities.

And the other, less confident group will tend toward a more balanced portfolio, which tends to do better in the long run.

3 Investment Ideas for Women

Now, for all their investment prowess, women actually invest at a far lower rate than men!

We’d like to fix that here at Money Done Right.

Here are 3 investment ideas that you can get started with today.

1. Invest in Real Estate With as Little as $500.

Logan and I are landlords.  Our first investment was the mythical “house hack,” a 4-unit property we purchased using FHA 3.5%-down financing.

Read: How 20-Something Me Bought 4 Units in Los Angeles

And landlording’s great!  We still hold that 4-unit as well as another rental property, and they have been very good to us.

But landlording has a major drawback, namely, the amount of time it takes.

Time is Money.

See, we get a better financial return on our time by working on this blog you’re reading right now than we do by landlording.

So rather than spending dozens of our valuable hours on Redfin or Zillow looking for properties we probably won’t even buy, we’d rather invest in hassle-free real estate deals that are way better than what we could find on our own.

(Come on; do you really think you’re going to find a good deal on Redfin where everyone else is looking?”)

Enter Fundrise.

So how do we invest in great real estate deals without being a landlord?

By investing through Fundrise.

Fundrise is the first private market real estate investing platform.

By combining technology with new federal regulations, Fundrise lets you invest in the once-unattainable world of private investments.

Better Deals Than We Could Find On Our Own.

Fundrise lets everyday investors like you and me invest in top deals across the nation — way better deals than we could find on our own.

Don’t get me wrong; we love the properties we own and landlord.

But they weren’t by any means incredible deals.

We simply didn’t have the investment capital (we’re talking 7 and 8 figures) to access top deals like Fundrise does.

Diversification

An extremely attractive feature of Fundrise is instant diversification.

For example, through Fundrise, we are invested in multifamily in Arizona, Colorado, Florida, Georgia, Michigan, South Carolina, Texas, and Virginia.

And we are also invested in loans funding deals in Los Angeles, Phoenix, and San Diego.

Fundrise Portfolio

Economies of Scale

Also, because Fundrise invests in large assets with many units, you get economies of scale.

  • If you own a single-family home, and you lose your tenant, you’re out of luck.
  • If you own a 4-unit, and you lose a tenant, you’re still making money.
  • But if you own a 100-unit apartment building, and you lose a tenant, there’s a professional management company on-site ready to show the unit immediately to minimize your vacancy losses.

Get Started With Only $500!

This is why we love investing in Fundrise: we get to invest as little as $500 into deals previously reserved for the richest of the rich.

Fundrise also offers a money-back guarantee.

For the first 90 days of your investment, they will buy your investment back at the original investment amount if for any reason you are not satisfied.

2. Lend money in $25 increments earning 4-6%.

Lending out money is one of the oldest ways to earn passive income.  It’s essentially renting out your money for either people to use, and the rent you charge is known as the interest rate.

Now, in the old days, if you wanted to lend money to somebody in particular, you were taking on a pretty risky business, unless he or she put up some form of collateral.  But now, thanks to technology, you can spread out the risk by only lending your money in $25 increments.

How does this work?  Well, let’s say Borrower A needs a $25,000 loan.  Instead of going to one entity, like a bank or rich person, to borrow the full $25,000 — which would be very risky to that one entity — he or she borrows $25 from 1,000 people.  This scenario presents much less risk because the most any single investor could lose is only $25.

Such an arrangement would have been administratively impossible just 15 years ago.  But thanks to the wonders of the Internet, it is now very possible, and the peer-to-peer lending industry, as it’s known, is thriving for borrowers and investors alike.

Click here if you have $25 and you’d like to earn way more interest than the bank pays you.

3. Invest in dividend-paying stocks.

We love dividends here at Money Done Right.

When you invest in a dividend-paying stock, you are acquiring a portion of a company that somebody else built and that thousands of other people work for, and they are giving you a portion of their profits. Blows my mind!

There are plenty of great places to open up a stock-investing account, but the one that’s getting us hot and bothered at the moment is Ally Invest.

Ally Invest is great because you can trade dividend stocks for as little as $3.95 per trade compared to $6.95 at E*TRADE and Charles Schwab.

Click here to sign up for Ally Invest to start investing in dividend stocks affordably!

Ally Invest Automated Investing

Ally Invest has developed a pretty amazing platform, and no matter if the stock market goes up or done, we still get dividends deposited into our Ally Invest account every quarter!

Click here to sign up for Ally Invest to start investing in dividend stocks affordably!

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Nia Simone McLeod

Nia Simone McLeod is a personal finance researcher and writer for Money Done Right. After receiving a bachelor’s degree in journalism from Virginia Commonwealth University, she started her writing career by going freelance and producing content for clients on a variety of different topics including personal finance. When she’s not tapping away at her laptop, she’s either curating her next great Spotify playlist or stuffing her face at the local ramen shop. Nia currently resides in Richmond, Virginia.

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