Warren Buffett Invests Like A Girl
It’s a sad fact that women are lagging behind when it comes to investing. According to a survey by The Telegraph, “only 10% of women have a stocks and shares Isa compared to 17% of men”. Yet investing for the long term is crucial.
There’s a lot of talk about “masculine” vs “feminine” style (with personal finance and everything else it seems, at the moment) and yes, sometimes these notions can be far from helpful. But research all points to the fact that there are investment styles that are more typical of women: we tend to re-invest in our families and communities, focusing on education and health, for example; we’re also interested in impact and have strong values. And we’re more risk-averse, so make more conservative investment choices. Sources from the World Economic Forum to Morgan Stanley all have strong figures on this.
And guess what – investing this way works. Just ask the financial editor and writer LouAnn Lofton, author of Warren Buffett Invests Like A Girl. She studied the habits of the world's most renowned investor and compared them to the latest research about men, women and money, and found that Buffett - one of the most successful investors in the world - has a “decidedly feminine investing style”!
So if our methods and ideas are so effective, why are women still investing less than men? A big reason is that women with a male partner will often defer all financial decisions to him.
We are very involved (80%) in the short term decisions (day-to-day, household finances) but only 23% of women take care of long term decisions such as investing, financial planning and insurance. Crazy though it looks on paper, we defer to our partners because we believe men know more! Maybe we feel we are too busy, or lack interest; maybe we are covertly discouraged by our spouses. But the fact is, taking part in financial decisions increases our financial security (“I know what will happen to my money if he’s not there one day”) and also our mental health.
Plus it’s worth remembering that when couples divorce, a finance-averse wife often discovers that her husband had a lot more debt and a lot less savings than she thought.
All this inequality is usually a hang-over from our childhood, when we saw our fathers and grandfathers taking charge of the family’s finances, probably because they were the main breadwinners, and often better educated than the women in the house. But now it doesn’t have to be that way. Young women are fighting for equality in almost every area of life, so it doesn’t make sense to still be kow-towing to husbands and boyfriends when it comes to what to do with our money. Women may still be reporting less confidence in their investment knowledge, but here at Vestpod we know that that’s changing, and learning about investing is a necessary step towards fixing the imbalance.
So what are our top female-specific tips for making your money work for you?
Cash savings are crucial but for the short to medium term, think about investing for the long term: women identify as conservative investors, so often keep money in cash, but inflation makes this a bad option. Look at your asset allocation: 80% of returns are explained by a strategic asset allocation.
Don’t time the market: good results are more dependent on your behaviour than fund performance! Mutual funds investors who hold steady are more successful than those trying to beat the markets. Just ask Mr Buffett.
Know your goals: pick your investments depending on your horizon and availability of cash. Stick to your plan (women tend to be good at this anyway) rather than chasing opportunities. Think short to long term, always being mindful that women live longer than men so will need about 80% of your income at retirement to cover living costs and healthcare.
In conclusion, you can be reassured and indeed inspired by the fact that statistics show women are awesome investors. They follow the golden rules of investing: patience (we are less likely to engage in perceived risky trading which is expensive and for the long term), discipline and diligence (Well Fargo research). There’s also a willingness to learn: we actively seek education and are humble when it comes to admitting mistakes.
It’s no surprise, then, that Wells Fargo sees single women investors outperform other household segments, and that women are found to out-perform men at investing by 1.8 per cent (Barclays / Warwick). Or that Fidelity Investments client data shows on average women performing better than male investors by 40 basis points.
The only surprise is that more of us aren’t doing it already! So take courage from your savvy sisters and don’t hesitate a moment longer: take the reins of your family’s purse and show the next generation what it looks like when women refuse to take a back seat. Because really, it just looks normal.
