Men could learn some lessons on investing from women

Friday, 23 August 2019

Lieutenant Jessica Shaw of the Royal New Zealand Navy charted an early start in investing.

'I happen to be someone who's happy to assume more risk,' Shaw says. 'That could be to do with my age, or confidence with finance.'

Shaw is part of a growing trend for more women to become active investors, with KiwiSaver and digital investment platforms like Hatch giving women the tools to close the investing gender gap.

Lieutenant Jessica Shaw from the Royal New Zealand Navy is okay with taking a bit of risk, and is a dab hand at investing.

Hatch general manger Kristen Lunman says women make better investors than men. 'I can prove it.'

* KiwiSaver: Should it be your retirement savings plan?

* Strategies for the five ages of KiwiSaver

* Five ways KiwiSaver scheme will change this year**

Lunman saw something remarkable when recession warnings sparked sharemarket panic earlier this month.

Where there was panic-selling of the United States shares that Hatch enables Kiwi investors to buy easily and cheaply, it was more often than not men doing it.

'Men are more likely to be overconfident in their ability to actively manage a portfolio,' Lunman says.

'That makes them susceptible to an 'illusion of control,' which is a tendency for people to believe they control chance outcomes more than they really do.

'This mentality often leads to over-trading and higher transaction costs that dilute performance.

'Every investor reacts differently to losses and gains. But an overconfident investor will often feel an extra urge to buy more in good times to capture more gains or sell more in tough times to prevent future losses.'

Shaw didn't panic when the recession warnings sounded.

She says she has a tendency to buy more when share prices fall.

Kristen Lunman and Natalie Ferguson from Hatch.

'I double down on my convictions', she says.

'If I feel I'm unsure of what's going on, I revert back to my core values.'

Shaw does not believe women are genetically pre-disposed to take fewer investment risks than men. That fewer women see themselves as investors is a matter of nurture, not nature, she says.

She is part of the Closing the Gap not-for-profit social enterprise running events in a bid to get more women to invest.

'We wanted to normalise the conversation about women and investing,' Shaw says.

While KiwiSaver has turned almost everyone into investors, many men, and even more women, don't see themselves as investors at all.

Market research done by Hatch found that for every 47 'engaged' male investors who had money invested outside of Kiwi Saver or a savings account, there were 42 women.

It also found 18 per cent of women had invested in shares, compared to 25 per cent of men, and that while 10 per cent of men had invested in exchange-traded funds, only 5 per cent of women had.

Fully 23 per cent of women would never consider investing in shares in companies, compared to 14 per cent of men, Hatch found.

More evidence has emerged of this risk gap.

The Financial Markets Authority's (FMA) Investor Confidence Survey indicated women were more likely to doubt themselves as investors and perhaps as a result, were far less willing to take on investment risk.

'Males are more likely to be very confident in the markets compared to females who are more likely to not know,' the FMA concluded after surveying thousands of New Zealanders.

Women should put aside their fears and doubts as investors, Gillian Boyes of the Financial Markets Authority says.

Ironically, caution and self-doubt may contribute to people becoming good investors.

'We know women tend to be more risk-aware, but this isn't necessarily a bad thing,' says Lunman.

'What this means is that we commit to research and can use our heads over hearts. We also know that we don't rate ourselves as investors. But we should because research has shown that women are better investors. Women don't try to time the markets and take a longer-term horizon.'

Lunman cites a study called Boys will be boys: Gender, overconfidence, and common stock investment,' in which US researchers analysed the common stock investments of men and women from over 35,000 households from February 1991 to January 1997.

The researchers found that men traded 45 per cent more frequently than women and partly as a result, women out-performed men by 0.94 per cent per year.

A similar exercise was conducted by The Warwick Business School on the investment gains and loses of over 2000 British investors between April 2012 and July 2016, and again, women out-performed men.

Hatch head of product Natalie Ferguson says it may not only be self-doubt and confidence holding some women back.

'When we ask why most of their longer-term money is in savings over investment accounts, we hear that they are too busy, worried about losing it, or it's all just too hard,' Ferguson says.

'We don't think this industry has done a good job of meeting women's needs; using language and an experience that works for them.'

FMA investor capability manager Gillian Boyes says the imagery of investing is subtly, or sometimes, obviously masculine, which could serve to put some women off.

Women had a number of traits men would do well to emulate, Boyes says, including their tendency to adopt a longer time horizon, set clearer goals, trade less, and be more willing to seek professional advice.

But 'men's higher self-confidence makes them more aggressive investors. Women fear a loss of principal so miss opportunities for higher returns,' she says.