Investing on Venus and Mars
Juliet Deschamps, Advisory Partner at The Wealth Corporation
John Gray’s cult classic “Men are from Mars, Women are from Venus” has gained such popularity because men and women are typically very different in nature. SigFig, the world’s largest portfolio optimization platform, released a report earlier this year illustrating the difference between male and female investors in the US, says Juliet Deschaps, Advisory Partner at The Wealth Corporation.
According to the report, over the course of the year reviewed, female investors enjoyed returns 12% higher than their male counterparts. Assuming this performance trend continued over a thirty year period, a woman with R100,000 invested would earn R58,000 more than a man. Men were also revealed to be 25% more likely to lose money in the market than women. Why?
A likely explanation is that men ‘churn’ their portfolios 50% more often than women. Churning is particularly detrimental to investment returns. For example, in 2014 frequent traders (or investors with an annual investment portfolio turnover of 100% and above) experienced average net returns of only 0.1% compared to the 4.7% enjoyed by other investors.
Overconfidence and cautiousness
A likely reason behind the lower returns earned by men and their tendency to churn their portfolios is overconfidence. According to the study, men are typically one and a half times more confident than women that they will better the market in 2015.
All things considered, the proverbial playing field evens out later on in life. This is evident in how a typical 25-year-old woman invests in a similar way to a typical 35-year-old man, while a 55-year-old man invests in a similar way to your average 65-year-old woman.
Despite being more successful investors than men on aggregate, women tend to be less empowered when it comes to their finances. A Fidelity Investments study tells us that 80% of women refrain from discussing finances with people they are intimate with.
Interestingly, while over 80% of women feel confident when it comes to managing a monthly budget, this is not the case when it comes to long-term financial planning. Indeed, a lack of confidence is a leading cause of financial illiteracy among women, despite it being a top concern of theirs. For example, while 77% of women cited feeling comfortable talking to a doctor on their own about medical issues, just 47% said they would talk with a financial professional on their own.
Money and marriage
All too often, one spouse will take care of the finances. And all too often, it is men who take the proverbial wheel in steering the course of their family’s financial future. According to Fidelity’s study, just 41% of partners make joint retirement investment decisions and only 17% of the respondents were “completely confident” that their spouse was able to take responsibility for the family’s retirement finances.
Couples need to decide together on their family’s needs and goals in both the short and long term. And together they need to agree on and take ownership of their financial plan if, ultimately, it is to work for them both. Eventually, when you are forced to live with the consequences of all the small financial decisions you made earlier on in life, this can lead to regret.
This Women’s Day, as we celebrate the contribution made by the women of South Africa both in the past and in the present, we encourage women to take advantage of their inherently more astute investment instincts and ensure that they are fully informed regarding their financial affairs, so as to take control of their tomorrow. It is only when you know what your tomorrow holds that you can truly welcome it.
The Wealth Corporation was founded in 2001. Since then, they have experienced considerable growth and gone through many changes, including the establishment of a national footprint and their partnership with Citadel in 2012. They have a proud history as being thought leaders in the industry, developing best practice in client service and advice processes and leading by example. Their advisory solution offers a complete view of the retirement planning and management process, looking at all aspects of financial and personal well-being. This process is called Integrated Insight.