An Ode to Women Investors
The Financial Services industry, in recent times, has witnessed a noteworthy change in the way women approach investments. From the typical ‘talk to my husband, investments are his area’, conversations have moved to ‘let’s ditch the Louis Vuitton or a piece of jewellery and invest in an Equity fund instead’. It really feels like a new dawn! It was not very long ago, when investments were considered the domain of men in our lives and leave alone investing on their own, women considered it too technical to even talk about it.
Today, refreshingly, women are playing a prominent role and taking charge of their money matters. Yes there are still a lot of women out there who have yet to experience the wonderful world of investing. Slowly, but surely the shift is happening. Most recent studies point to the fact that not only have the number of women investors increased, women are seen to be outperforming men in terms of return on investments.
Sounds unbelievable, right? ….Considering the many preconceived notions about women investors. So let’s bust some of these myths and decode the recipe of success for women investors.
Process driven vs Ad-hoc: Women usually take a big picture perspective to investments. They define their short and long term requirements and their investments are generally aligned to these goals. They seldom act on tips to make a quick buck. They have a more disciplined approach. Investments are a means to an end which would typically be saving for retirement or to buy a house or education expenses for children. Once they know what they are saving towards, they end up saving more and invest steadily. While return is of course important, the focus is more on the corpus that they need to build.
Risk-aware vs Risk-averse: The popular conception is that women are risk-averse and in the process miss out on opportunities to maximise their return. This is not entirely true. Women generally have a cautious approach and they use this to their advantage. They do their full homework. They go the extra mile to understand the ‘why’s and how’s’ of their investments and evaluate risk vs reward. They are aware of the risks they take and their informed decisions makes their convictions strong.
Fixed Income vs Equities: The theory that women only invest in fixed deposits, bonds and other low risk investments is slowly losing ground. Women usually go the whole hog when it comes to the process. They follow the asset allocation strategy and diversify across asset classes based on their personal risk tolerance levels. Risk appetite is extremely personal to an individual and varies from one person to another. Contrary to popular belief, women are comfortable with equity investments and have high allocations to equities. They are largely long term investors. They show patience and stay the course during turbulent times without making any undue changes and thereby reap the benefits of long term investing.
Additionally, women have a better sixth sense and are emotionally far more attuned to knowing when they are being pushed into buying a particular product or being mis-sold to. They take time to trust their advisor but once they do, they tend to remain loyal.
To cut a long story short, women do more rights than wrongs which makes them successful in their investments. They have the right temperament and approach and because they feel they are lacking in knowledge and confidence, they put in extra effort in understanding and investing. And once they understand both the risk and the reward, they tend to stay the course.
Many years back, LouAnn Lofton wrote the famous book ‘Warren Buffet invests like a girl’. On this International Women’s day, let’s raise a toast to today’s girls who are investing like Warren Buffet!!
