I noticed something over time: women invest better than men.
This is not always the case, of course. But it’s generally true.
For example, hundreds of you have written to me since the launch of this newsletter last September. A trend is emerging: women write to ask questions, men write to give answers.
Here is an excerpt from an email recently received:
“It’s important to take into account, I think, what’s happening demographically on the planet right now and the ‘deglobalization’ that started with Trump coming to power and that Biden has pushed even further with its CHIPS Act and his IRA. Moreover, Brexit has caused and continues to cause an impoverishment of Britain that is still looking for itself. If you follow the news, you saw yesterday that the United States convinced the Japanese and the Dutch to follow them on China sanctions on semiconductors. Moreover, if you take a look at Huawei, it was greatly (with a capital “G”) affected by the US sanctions and those of allied countries that followed. »
I’ll let you guess if it’s a man or a woman who writes…
I replied to this reader that there is nothing wrong with being interested in the news, but that it should never – ever – influence our investment choices. The performance of investors who make investments based on what they saw in the news the day before is simply atrocious.
According to a 2021 study by the American firm Fidelity1 across 5.2 million investment accounts, women outperformed men by 40 basis points, or 0.4% per year, on average, in their investment performance over a 10-year period .
It may not seem like much, but over several decades, a difference of 0.4% per year can mean tens of thousands of dollars, or even more, in additional wealth.
This outperformance comes from the fact that women are often more disciplined and less impulsive with their investments. The study also notes that women are generally less confident than men about their knowledge of financial investments, and this leads them to make fewer transactions.
Men, on the other hand, often seem obsessed with guessing the future. To us, the world is like a giant Rubik’s cube: every fiber of our being is convinced that miraculous stock market returns await those who solve it.
Why is this attraction so strong? Getting rich quick is exciting because it would save us from having to save part of our salary for years to improve our situation. It would also solve the problem of those who start investing later in life, and who want to “catch up”.
Unfortunately, that’s not how investing works. And even if we’re right about where things are going, we won’t know how our investments will react to it.
For example, an investor who predicted that Vladimir Putin would launch a war in Europe in 2022 might have decided to dump his European stocks and buy US stocks before the invasion of Ukraine began. Logic ? Yes. Paid? No: European equities have done better than US equities over the past year.
Or imagine that a visionary investor bought Pfizer shares with both hands at the start of the pandemic.
Pfizer shares are up 59% since March 20, 2020. That’s good, but it’s less than the US market as a whole, which is up 78% since that date.
I could spend hours giving examples like these. The number of false leads when it comes to financial investments is endless. It is for this reason that humility should be our basic attitude when investing money. Those who don’t know it yet risk paying dearly to find out.
In my experience, men also tend to imitate what other men are doing. For example, recommendations to buy and sell securities made by financial analysts.
Written in deft vocabulary, accompanied by professional graphics, these recommendations seem solid, consistent, practically carved out of rock.
But an American study carried out in 20192 showed a negative correlation between analysts’ buy or sell recommendations for large companies and the returns of the securities in question. In other words : do the opposite of what the analysts were recommending (i.e. buy when they said sell) paid off better than following their advice.
If you recognize yourself in all this, and what you read here does not convince you, I have a suggestion: keep a logbook. You can write the date, your choice of investment, the thesis that supports this choice and your return objective. You can also include all kinds of predictions. Hyperinflation is about to hit us? An unprecedented crash awaits the global economy? Write it down.
Then, in a year or two, you can go back to see what you wrote and assess the accuracy of your predictions.
Guys: the stock market is not interested in our logical, sensible, enlightening analyses. The sooner we understand this, the sooner we can stop sabotaging our efforts and learn to invest like women.