Female Investors

Yesterday was International Women's Day, a date dedicated for the upholding to women's rights. Over the decades, it seems, the world has become less biased on the treatment of men and women, although there could be a lot more to do. In Hong Kong this year, for instance, social groups lobbied the government to improve employment opportunities for women. Fewer people talk about the sex biases in the financial industry. There are many more male fund managers and analysts than female. There are more male investors than female investors. Laws and regulations do not discriminate between male and female investors, or market participants. Some say men are born to play risky games. They are fond of taking risks in, say, car racing, and hence they invest better then women.

Men Invest Better?
The men's dominance is probably caused by social perceptions that investing is a men's sport. Yes, investing is more popular among men than women. But that does not imply that men invest better than women. In fact, a study shows that women do it better.

Women Invest Better?
A study by economists at the University of California at Davis, which surveyed 35,000 investors, found that women's portfolios, on average, outperformed 1.4 percentage point a year, between 1991 and 1997. Among single people, who are considered more independent in their decision-making, the performance gap was even larger. Single women earned 2.3 percentage points more a year than single men.

The statistical study could be misleading though.

Take cooking, traditionally thought of as women's play. More women like cooking than men. But most chefs are male. If we run a survey on a pool of cooks, we would probably find that male cooks, on average, do better than female cooks. However, the survey does not take into account that the majority of men never enter the kitchen.

Risk-tolerance differs?
i think it is hard to generalize about the investing performance between sexes. Terrance Odean, a co-author of the UC-Davis study, does make a point in investing. He says both genders tend to buy stocks that underperform the ones they sold. That's to say that the more transactions one makes, the more likely they make mistakes. Men tend to be overconfident about their ability to pick stocks, and they switch positions more frequently than women do. But, in my view, things keep changing rapidly.

Nowadays, women do take risks, one way or the other. They take active role in the business world, which require them to invest their time and efforts with uncertain payoffs. There have been many successful businesswomen.

Carol, a friend of mine, hates investing. She has sworn that she will never invest again, after getting the snakebite experience from investing in PCCW #8 in 2000. Generally speaking, she is a businesswoman, making tough deals with men, mostly buyers from the U.S. She works for a handbag manufacturer that has a factory in the countryside of Shenzhen. She travels alone to the factory once or twice a week, and works until midnight, when the factory is empty and dark. She is not scared of it, at all. She says she has got used to it. Because she is aware of the risks of staying late in a factory, she does not fear for it. In contrast, she is not aware of the risks of investing, she is afraid of it.

In contrast, my grandma is a successful investor. At the age of 79, she has a good memory and pays attention to details, although she didn't receive any secondary education. She invests for the long term and in a conservative manner. She didn't risk buying PCCW in 2000, nor did she buy on tips from newspapers, or recommendations from friends. Her aged holdings of Hang Seng Bank #11, China Gas #3 and others provides her with a stable income for her retirement life, let alone the compounded capital gains over the decades. She is not afraid of investing because she knows what it is about.

Both Carol and grandma take risks. What makes the difference is the awareness of risks. Each of them takes those that they are familiar with.

Investing = Car-racing?
Boys play games, most of which are competitive in nature. Girls play games, most of which involve role-playing. After boys grow up, they are more likely to speed driving in the street and drunk driving. Wait a minute. i am sure investing is much safer than those activities that risk their own lives and other people's. And women today can easily handle it.

As women are taking more important roles in decision-making, they will invest more. It is just a matter of time. It has nothing to do with DNA. i have noticed that the advertisements of apartments of Bellagio and Liberte target female audiences. They project romantic lives in which couples, living there, spend time watching stars and chatting intimately. Some property developers seem to know that wives are highly influential in the decisions of buying properties.

Mar 9, 2005
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