Women in the Stock Market

Apparently, stock market is a guy thing. But the most important in investing attributes – patience and excessive risk avoidance – are typically female.

 

Still thinking that women are novice in stock markets? That is not true.  – ‘Women traders like to take profits and avoid losses instead of trying to prove themselves right, what characterizes male traders. I find that the percentage of successful traders is higher among women.  They tend to be less arrogant, and arrogance is a deadly sin in trading.’ – says Dr. Alexander Elder, famous American psychiatrist.  You can trust his statement as he used to be a professional investor for several dozen years who described his experience in a book, called ‘Trading for a Living’.

Also the scientists from Cambridge and Berkeley defuse the myth of men’s primacy in investing. The result of the research they carried out indicates that women are excellent traders.  They are more likely than men to do a realistic assessment of the situation in the stock market, they are more disciplined and have an innate caution. And this, beside the knowledge, is a key to success in the stock markets.

LouAnn Lofton, in her book ‘Warren Buffett Invests Like a Girl’, also convinces that women and stock exchanges are a perfect match. The author is a publicist and an investor. She started her adventure with stock exchange when she was 22, after her father’s death, who left her a modest inheritance. She didn’t have any idea for a business so got interested in stock exchange.  She bought her first stocks, Nike shares, in 1998 for 22 dollars. She sold them 4 years later for four times higher price and she earned several dozen thousand dollars.

This success is largely due to her ability to withstand the temptations to trade short-term fluctuations what is done by most men. – It’s risky and expensive, even by virtue of commissions charged by brokerage houses.  Lofton cites in her book one study that says men trade stocks in their accounts by almost a half more often than women, paying higher transaction costs and capital-gains taxes.  And their investments achievements are not better than women’s.  According to the study conducted by University of California in Davis the value of portfolio of women increase during a year 1.4% more than the ones belonging to men. More interestingly, the champions of the stock markets are single women. As per scientists they earn 2.3% more than single men.

The authors of the report, professors of management and finance, Brad Barber and Terrance Odean explain this by the fact that women must work harder to secure their financial future, they live longer than men and usually they earn less than them. Hence they are more cautious while taking any investment decisions what leads them to better result.

The number of women trading in the stock market is less compared to men.  In the U.S. they comprise over 20% of investors.  In India, according to Indian Equity Investors Survey 2010, 7% of housewives surveyed invest in equities.  And they are not only managers of large companies or educated economists. Among female investors there are many women working full time and in certain countries, like Japan or U.S., there are many housewives participating in stock markets.

The housewives in U.S., since the forties of the last century, establish investment clubs. Most commonly, they create it with their sisters, friends or neighbors, who they meet for coffee and talk about money. Not only how to spend it but also how to earn it. Together they establish brokerage account (what is cheaper), learn the rules of stock markets, do the analysis and invest. According to the data from National Association of Investment Companies (NAIC), female traders invest approximately 50 dollars per month. It’s not a staggering sum but if we multiply it by the number of participants it gives considerable amount. Today in the U.S. function 23 thousands female investment clubs which cumulated more than half million of female investors.

They also have a mentor, which is not Warren Buffet or John Templeton. The idol of Asian investors is Mayumi Torii, Japanese woman, who primarily invested in foreign exchange market, trading online without telling it to her husband. Few years ago she played against yen to weaken it and in a dozen or so month she earned more than 150 thousand dollars. In 2008 she wrote a book about her investment strategies and she also founded a club for women interested in trading. She called it FX Beauties.

Guru of American women is Kim Kiyosaki, wife, mother, housewife and investor, who published a book called ‘Rich Woman’. She convinces that investing is not difficult and building own portfolio (shares or real estate) doesn’t require Harvard diploma. The recipe for success by Kim Kiyosaki is to define a purpose, patience, deepening of investing knowledge and consequence.

The same opinion has LouAnn Lofton, who found the source of success of the most famous and richest investor in the world, Warren Buffet, in… his femininity. Lofton argues that Buffet flies so high because of his strongly developed feminine characteristics: patience, rationality and caution. Probably there is a lot of truth in that since he himself hasn’t denied it.

The following are rules created by Lofton for women who want to start trading in the stock market:

1. Don’t listen to people who claim to know about investing more than you (unless it’s Warren Buffet).
2. Find your strengths which you can use in investing. One of the most important is patience because it means less risky decisions and greater chances for profits.
3. Create an emergency fund on which you’ll save money. Open brokerage account. It’s simple and you can do it online. Check how high are the commissions for transactions. It is important that your account is easy to use and accessible all the time.
4. Start investing by buying one or few shares in order to see if you understand everything.

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Source: Longina Grzegórska, "Women on the Trading Floor", Newsweek Poland.