Male and female paths in investing. Is there a "battle of the sexes" in the financial market

YEREVAN, May 15. /ARKA/. Investors focus on different factors when strategizing: from objective indicators, such as goals and financial situation, to individual traits, such as temperament and willingness to take risks. Scientists - medical and environmentalists - are trying to identify regularities, to clarify what actually influences the investment process, to separate stereotypes from reasonable provisions.

One of the questions that attract attention is: do a person's decisions on the financial market depend on gender, what is it manifested in? Let us consider "male" and "female" investing from different points of view and describe general trends.

Risk tolerance and investment choices

It is widely believed that women are less risk averse than men. However, it is not all that clear-cut. When relying on the results of various tests, you need to take into account the focus of the tasks and the amount of data.

The willingness to take bold decisions in practical investing often depends on psychological characteristics and context. Women seek to secure their own future and minimize potential losses. It is important for them to be in control of the situation. This is also due to lower earnings compared to men, even in the same positions.

Women prioritize performance and reliability of investments over achieving a quick profit. In the long term, their investments are successful. However, the volatility of assets tends to flatten over a longer time period. Therefore, even more risky investments, which men are more likely to make, can be effective.

Women rely on the method of diversification, which allows them to balance their portfolio. Men are more often ready to choose stocks as the main asset - risky and profitable assets.

Trading frequency and impulsiveness

According to UK brokerage company IG, men make trades 45% more often, and those who do not have additional financial responsibility for others - 67% more often. They are more likely than women to engage in trading, that is, making trades during a trading session. This approach differs from portfolio investment = it has a shorter asset retention period and the greatest risk, often associated with leverage.

Women, on the other hand, tend to take a measured approach characterized by less frequency and more patience. This can lead to better results, especially during periods of market volatility.

Impulsiveness and boldness in men's behavior can be explained by high levels of testosterone. This was revealed, for example, by scientific experiments conducted by London Imperial College. During the study, the process of stock exchange trading was modeled. Participants with higher testosterone levels made optimistic and risky decisions.

Men were characterized by confidence in their decisions and impulsiveness. IG estimated that the excessive frequency of trades resulted in male investors losing 2.65% of their annual net returns. On the other hand, neuroscientist and former trader John Coates showed in his experiment that overconfident traders with elevated testosterone made large profits that outweighed the risk.

The difference in results points to the inherent heterogeneity of the market and the importance of context. The presence of both aggressive and conservative investors is important to maintain balance.

Decision-making process

Women are focused on achieving their own and their family's financial security. According to Fidelity Investments, a large financial holding company, women value a clear resource for management and often a knowledgeable advisor (22%). They tend to prepare large amounts of capital and use proven mechanisms.

Men often prefer independent analysis. They turn to independent sources, find information on the Internet, focus on financial news, agency research and data from leading market players. Men tend to choose companies that are often mentioned in the press and actively use social networks to communicate with other investors and monitor the situation.   

Performance

Research over the past three decades shows a consistent trend of women investing more successfully. As early as the 1990s, the University of California, Berkeley, found that women outperformed men by 1%.

The Swedish company Euroclear Sweden conducted a study in 2023 and found that in the national market for three quarters portfolios managed by women grew by 1.9%, while male investors saw a 2% drawdown. The number of female clients of the aforementioned IG brokerage has grown 48% in four years since 2019. They were also found to be more successful than men in terms of returns.

According to The Fintech Times, a global news outlet, women outperformed men by 1.94%, while Fidelity Investments writes about a stable difference of 0.4%.

Women's superior performance is also evident in the compilation of portfolios that are optimized in terms of profitability and return, due to a more conservative approach.

Investing and values

Women are more likely than men to be guided by the principles of socially responsible investing. The concept is to invest in companies that care about the environment, have a positive impact on society, and use fair and transparent management mechanisms. Their activities may be related, for example, to environmental projects or the development of medicine.

If an organization stops supporting important projects, violates financial and corporate rules, investors "punish" it, seeking to provoke a stock crash.

. If an organization stops supporting important projects, violates financial and corporate rules, investors "punish" it, seeking to provoke a collapse of shares.

Female investing portal writes about 71% of women and 58% of men investing on the basis of ESG (environmental, social and governance) principles. Simple, a company providing services for family businesses, cites data that 61% of women aged 30 to 40 choose issuers whose activities have a positive impact on society and the environment

Level of knowledge

Financial literacy tests are regularly administered in different countries, and men tend to do better. It is important to note that the gap narrows in cases when the answers do not include the option "I don't know / find it difficult". This means that women are hindered, first of all, by insecurity and the desire to hide in "comfortable" neutrality.

The conviction in their own ignorance leads to refusal to invest. Women are afraid of negative experiences that could lead to financial losses. Men, on the other hand, are ready for practical steps and, as a result, invest more and more often

Research conducted by Fidelity over the past two years has shown that women feel confident in managing their personal and family budgets - an average of 70% of those surveyed. However, only 19% of female participants felt positive about their strength in investing.

Women's presence in the market is also limited by the low engagement of older generations. Fidelity says that women born since the 80s are more likely to invest. That said, they are willing to enter the market fairly early. In the 18 to 35 group, the average age at which women open a brokerage account is 21.

To summarize:

Data from financial organizations and market analysts reveal differences in "male" and "female" approaches to investing. Moreover, experts draw our attention to the fact that:

- general trends are not the law;

- it is not the fact of belonging to a certain sex that matters, but gender socialization - in other words, the perception of men and women of their roles in society;

- each person's investment choice is individual.

The material is prepared within the framework of a joint project "The Year of Investing in Oneself" by ARKA, AMI Novosti-Armenia news agencies and Freedom Broker Armenia. 

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10:00 05/15/2024