How female investors are outperforming

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CMC Invest

08 March 2024

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When it comes to investing in stocks and shares, 66% of men have their money invested versus 44% of women and a third more men invest in stocks and shares ISAs (Individual Savings Accounts) than women.

When it comes to gender diversity in the investment industry more broadly, just 12.1% of portfolio managers in the UK are women – a minute 0.1% up from the 2022 figure of 12%.

Women outshine men

So, it’s clear that women are underrepresented, both in industry and in investing terms. But, just because we aren’t doing it, does this mean that we aren’t as successful at investing?

Apparently not. Neil Stewart, professor of behavioural science at Warwick, analysed 2,800 investors using the Barclays investing platform over a period of three years, and found that women outperformed both the men and the FTSE 100 – which is made up of the 100 largest companies in the UK – over this timeframe.

The return achieved by men was on average just 0.14% above the performance of the FTSE 100, but women outstripped the index by 1.94% on average, and outshone the men by 1.8%.

Why are women outperforming?

In his study, Stewart looked at age, trading frequency, the amount invested, and the type of investments held by both genders and found the biggest difference was the types of stocks men and women traded in.

According to Stewart, men use a ‘lottery style’ approach to stock-picking, investing in speculative, lowly-valued stocks. This is in comparison to women who opt for companies that already have a good track record, which tends to create more rounded and diversified portfolios that spreads the risk.

Long-term thinking

An overarching investment tip is to always think long-term rather than short-term, and that is exactly what women are doing, according to Stewart. The Warwick study found that women trade less frequently than men, buying and selling nine times on average over a year versus 13 times from the average man – and by making fewer trades, women aren’t as impacted by fees as a result.

Have faith in yourself

While the more considered, long-term approach to investing is undeniably a good thing, women are lacking faith in their own abilities. A study by Fidelity Investments revealed that just 9% of women think they are better investors than men, but this clearly isn’t the case.

Women have plenty of reasons to feel empowered to invest, not least because of the gender pay gap, which means women are earning 14.5% less than men on average – plus the fact that our longer term approach is proven to outperform the FTSE.

My big takeaway

It’s never too late to start investing and you don’t have to be legendary investor Cathie Wood to give it a go.

Educate yourself on how investment platforms and stock markets work, start small, and invest what you feel comfortable with. And, before you know it, you’ll have joined the ranks of women outpacing both men and the FTSE.