- Analysis of Hargreaves Lansdown clients reveals that in the three years from August 2014-August 2017, women outperformed men by an average of 0.81%.
- If that performance was replicated over 30 years, women would end up a 25% bigger portfolio.
- Four common traits in the way women approach their portfolios lie at the heart of outperformance.
Over the three years from August 2014 to August 2017, women investing through Hargreaves Lansdown saw their investments increase 0.81% more than their male counterparts each year. If that performance continued for 30 years, women would end up with 25% more investments than men.
Sarah Coles, Personal Finance Analyst, Hargreaves Lansdown:
"Women are far better investors than they think they are."
"They are often held back by a concern that they don’t have sufficiently in-depth knowledge, or that they don’t want to take on too much risk. As a result, industry figures show that women open 20% fewer stocks and shares ISAs than men."
"This analysis demonstrates that these concerns are misplaced. Women who invest overwhelmingly have the knowledge they need in order to make sound investment decisions. And rather than working against them, their determination not to take excessive risks with their investments is one of the things that makes them such good investors."
"Of course, this doesn’t detract from the fact that men have also generated excellent returns during the period. In fact, roughly a third of both men and women saw returns of 30% or more over that three year period, which goes to show the success investors have had, regardless of gender."
Four reasons why women are investment naturals
1. Women are more likely to have naturally diverse portfolios
Some 44% of women have either most or all of their portfolio in funds – compared with 38% of men. This naturally diversifies their portfolios more quickly, because fund managers will take a stake in number of companies, so even a small investment is quickly split in several different ways.
This has the benefit of spreading the risk, so if one share disappoints, it may be offset by growth in others. As a result, diversified portfolios tend to be less volatile.
2. Women tend to hold less risky investments
The analysis found women were less likely to invest in riskier assets – such as single company shares of smaller firms or those listed on the Alternative Investment Market. As a result, women were 50% less likely to suffer a loss of 30% or more in this period – although both men and women were highly unlikely to face losses of this kind.
3. Women are more likely to ‘buy and hold’
Women trade shares 49% less frequently than men, and funds 67% less frequently, so they are not incurring trading costs.
There is a flip side to this, because even with a buy and hold strategy you do need to revisit your portfolio regularly to make sure your investments still suit your needs.
4. Women are more likely to invest through an ISA
Despite fewer women opening a stocks and shares ISA, of those who do invest, some 65% of women invest through an ISA, compared to 58% of men. Women are also 50% more likely to be the named party on a Junior ISA – invested on behalf of a child. By investing in an ISA, they are sheltering their investments from income tax and capital gains tax, and avoiding them from eating into their returns.