investing: Patient and risk-averse? Women can be very good investors


John Gray’s acclaimed book “Men are from Mars, Women are from Venus’ throws light on the fundamental psychological differences between men and women. The differences in the behavioral traits of the two sexes are very stark. These differences can be seen in their approach to money management and financial decision-making, too. While men are risk-taking aggressive investors, women are generally risk-averse and more goal-oriented.

Globally, equity investors are predominantly male, with the number of males far outnumbering females in every country. The global ratio is 76 percent male to 24 percent female. Study by Choosebroker, has found that in Emerging Markets, the Philippines with a female investor ratio of 44 percent has the highest number of female investors; in India the ratio is 21 percent. It is poor in Brazil (16), Pakistan (15) and Bangladesh (12).

Women’s financial behaviour has some interesting attributes:

Women are good savers and savings are goal-oriented

Generally, women are good at saving money. It has been so historically. Particularly in developing economies, women are frugal in expenditure and save whatever they can.

More importantly, they save for the realization of certain goals like education of children, weddings of daughters, purchase of a dream home etc. In a survey that Geojit conducted in 2021 among our women clients we found that education of children and wedding of daughters were women’s top financial goals. This goal-specificity of savings distinguished the financial behaviour of women from that of men.

Women fall short in investment decisions

While being good in savings, women fall short when it comes to investing. Financial history tells us that stocks outperform all other asset classes in the long run. But, only a minority of women invest in stocks and mutual funds.

Majority of women, even the highly educated and qualified ones, leave investment decisions to the male relatives whom they trust – dads, husbands, brothers. Our clients are the financially literate segment. Even for them, their male relatives take investment decisions. Our survey found that for 33 percent of our women clients, their male relatives took investment decisions.

Women are, generally, risk-averse
Women tend to avoid risky investments. Only a small minority invests in stocks. Financial literacy is lower among women than men. Women prefer gold and bank deposits to stocks. This means they are missing out on the best performing asset class.

Risk aversion has its benefits too. Even among women equity investors, traders are a miniscule minority. It is a fact that vast majority traders/speculators in the stock market lose money. Since women don’t speculate they don’t lose money like men traders. This is a clear positive.

Women have the temperament to be great investors

“To make money from the stock market, you need an average man’s intelligence, but ten men’s patience,” is an adage in the stock market. It is a fact that women have more patience than men. Therefore, potentially they can be great investors. What is lacking is financial literacy, particularly knowledge about various asset classes and their risk-return profile.

More women are entering the stock market

Explosion in retail investor accounts is a major post-pandemic development. Brokerages are reporting a sharp spurt in women client base. In Geojit, now, the women client base is 29 percent.

In India stocks have outperformed all other asset classes in the long run. The BSE Sensex (100 in 1979) has appreciated to above 60,000 now (October 2021) giving a CAGR of around 16 percent. This is almost 8 percent more than the 7.35 percent CPI inflation during this period. Stock market returns have clearly beaten the returns from competing asset classes like gold and bank deposits.

Successful investors are those who invest in good quality stocks/mutual funds and show the patience to stay invested for long. Women have more patience than men; so they can be excellent investors. Therefore, the present trend of more women entering the market is healthy and desirable.

(The author, Dr VK Vijayakumar, is Chief Investment Strategist at . The views are his own.)

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