A study by Vanguard found that during the 2008-2009 financial collapse, men were much more likely to sell their holdings during the bottom of the stock market. This selling represents huge losses as they missed the start of a market rally that began in the spring of 2009. So the question is: “Are women better investors than men?”
Some experts think the answer is yes, due to a major investment behavior mistake, overconfidence. Psychological research has established that men are more prone to overconfidence than women. Overconfident investors tend to trade too much, which most of the time hurts their investments in the long term. While men focus on the short-term gains and losses, women tend to pay less attention to the volatility of the market and are less emotional to their investments than men. This pays huge dividends over time. Staying the course will not only prevent an investor from making a bad timing decision (i.e. buy high and sell low) it will also help reduce your overall costs.
In the Vanguard study, they found that:
1. Women are a little more likely to contribute to their company retirement plan than men.
2. Women who do contribute to a company plan, generally save more than men.
3. Women have a slightly more diversified portfolio than men.
4. Women tend to trade less than men.
To view the report, go to: https://retirementplans.vanguard.com/VGApp/pe/pubnews/WomenBetterInvestors.jsf
A good rule of thumb is to remember that a short time period of returns should NOT be enough to create overconfidence among investors. Investors should avoid overestimating their ability to predict future outcomes, basing their decisions on past trends or performance. It is important to take a long-term view when investing.
If you would like more information on how you can be a better investor, please contact my office to schedule a free consultation.
Carolina Wealth Management, Inc
1760-A East Arlington Blvd.
Greenville, NC 27858