Celebrating International Women's Day: The Role of Yin and Yang in Investing and Life

Published in

·

3 min read

·

12 hours ago

My congratulations to those ladies and gentlemen who celebrate International Women’s Day on March 8. This is an open secret than men tend to dominate in the world of finance and investing. Still, they have several things to learn from women as research shows. So what are the major features of a typical female investor?

Merrill/Bank of America emphasizes (see Reference 1 below) that women are more patient investors. Women indeed tend to be more patient than men in most life situations. They follow this approach in investing too. In other words, they are just calmer. This is despite the fact that women are usually viewed as emotional creatures. However, when it comes to serious issues they behave in a more pragmatic way. For example, scientists claim that historically men, if they could afford it, preferred to choose women based on their appearance, while women preferred to choose men based on their social and financial status. So whose approach is more rational, after all?

That is probably why women’s investment portfolios are often more balanced and diversified. It is quite probable that women are less willing to take risks, while their patience allows them to pursue a more consistent long-term investment strategy where there is no place for risky and hasty decisions. Merrill/Bank of America agrees by pointing out to the fact that women simply put more effort into information gathering. Before making an investment decision, they are not afraid of asking “stupid” questions and are more open to follow professional advice. They are lucky enough not to suffer from the testosterone-driven excesses of a typical competitive and emotionally fragile male ego.

In general, any investor should have some investing goal in mind. However, men’s goals are often rather abstract like “beating a market benchmark”, while women’s goals are usually quite specific. To some extent their thoughtful and relatively cautious attitude towards investing is explained by a gender gap in life expectancy. As everyone knows, women outlive men. This in turn means that women’s investment portfolios should have a longer investment horizon.

The Motley Fool, a U.S. financial and investing advice company, has also compiled quantitative research whose purpose was to characterize women as investors (see Reference 2 below):

The main conclusions are as follows:

First, women are becoming more active stock investors with at least 60% of them owning stocks in 2023, compared to around 40%, historically;

Second, women start investing at a much younger age these days. Women in the age group from 18 to 35 years first opened a brokerage account at the age of 21, while women in the age group 36 years and older first opened a brokerage account at the age of 30. Nine additional years of investing experience may provide a significant boost to an eventual long-term return.

Third, women’s investing strategy is more conservative with only 39% of women pursuing aggressive investment policies, compared to 55% of men. So a typical female investor is more deliberate and cautious. As a result, she prefers her portfolio to rise in a less volatile manner.

Fourth, women’s investing strategy is more stable. Women remain less impulsive during both market bubbles and market collapses. Furthermore, women achieve better long-term results with female portfolios outperforming in the range from 0.4% to 1%. A Wells Fargo research concludes that “women achieved higher returns while taking on less risk than men.”

Definitely, all is not so white for female investors. And all is not so black for male investors. After all, there are fifty shades of grey in between as we know. Historically, men have ensured the progress of societies, while women have ensured their stability. When any society becomes too masculine, progress and development tend to degenerate into conflicts and chaos that eventually lead to its spectacular collapse. When a society becomes too feminine, stability and predictability tend to lead to its stagnation, decline and, eventually, extinction. As always, only a healthy balance between Yin and Yang wins in the long run.

References:

1. “ What We All Can Learn From Women Investors”, Marci McGregor, Lorna Sabbia, Merrill/Bank of America, 2023.

2. “Investing for Women: What Should You Know”, Lyle Daly, Updated February 20, 2024, The Motley Fool.