April 28, 2022
So, what makes women better at picking winning shares and mitigating investment risk?
The gist:
Capital.com’s Pulse study, which “analysed emerging trading trends since the start of 2021, found that women think differently to men when it comes to investing,” and this has “proved to be an advantage.”
- Women tend to prefer short-term trading while men opt for intraday trading. Short term trading involves making fewer trades and holding onto shares for longer, while intraday trading (also known as day trading) often involves buying and selling shares by taking advantage of minute-by-minute or hourly changes in asset prices.
- Women also prefer equities and multi-asset trading, while men tend to trade in crypto and currencies. Despite not taking advantage of micro-opportunities, women generally fare better because they tend to invest in sectors and companies that they understand.
- Women take fewer risks and have smaller portfolios, which are typically 34% less in size than men’s portfolios. New female traders start with smaller average deposits than new male traders: $226 (£173) vs. $287 (£219).
- Female traders are more inclined to use short selling strategies. Short selling involves investors borrowing a security and selling it on in the hope that they can buy it back later for less. This is a particularly good strategy to adopt in bear markets (when stock prices are falling).
- Women are also tactically better at managing the risk of losses, which shows they are more aware of the potential for things to go wrong.
Overall, female traders outperform men because they are more patient, cautious and disciplined.
The Stats:
- A 2021 Fidelity Investments study found that women earned higher returns than men when investing (typically 40 basis points more).
- Data from Vanguard covering the first quarter of 2020 showed that even though women traded less frequently than men they still got better results.
Connect with the Capital.com Citizen post here.
