Why Women Do Better in Trading & Investing: Insights for Women and Men
A recent survey of over 1000 OTA students in April 2021 indicated that 22% are female. While we are happy in that being a significant proportion, we also think it is not enough because there is lots of research that suggests women should be taking the lead more than men in trading and investing.
In his March 2017 article, Why Women Make the Best Stock Traders, Professor Peter Swan of the University of New South Wales in Sydney, Australia concluded that “female traders are far more “contrarian” than their male counterparts”. He continued saying, “this could be because they are better at picking up nuances in markets than are males. Moreover, they are not carried away by the euphoria of rapidly rising prices, as Wall Street dominated by aggressive male investors, tends to be”.
Very interesting and I reached out to Professor Swan to ask for an updated comment which he was kind enough to provide (April 2021). Here is what he said:
- “Based on every trade in Finland conducted over every day for 17 years, research I have undertaken with Joakim Westerholm and Wei Lu (The Gender Face-Off: Do Females Come Out on Top in Terms of Trading Performance?) shows that individual males trading directly from home with institutional counterparties are far better than their counterparties consisting of both domestic and foreign institutional investors over the same extensive time period.
- The same is true for women with institutional counterparties. Noticeably, when women are pitted against male counterparts for the same period, females come out clearly on top.
- This is because women, even more than men, shun the hype associated with rising prices promoted by trend-following institutional momentum traders utilizing other people’s money.
- Thus, males and particularly females are “contrarian”, buying when cheap and selling when expensive.
- Females trade less than males as they confine trading for when it is clearly profitable over the medium to long-term”.
We are so grateful for these insights from Professor Swan and his colleagues, and for their research methodology which itself is contrarian and better reflects reality. Read more: Different Research Methodology Begins to Change Commonplace Misconception that Retail Traders and Investors Generally Lose Money.
In another 2017 article, “Who’s the Better Investor: Men or Women?”, Fidelity shared its research revealing that women earn higher returns and save more than men. They believe this is because women tend to plan with more purpose, thinking more holistically and taking on less risk. They have also seen year on year increases in women engaging in education.
In a June 2018 article, “Are Women Better Investors than Men?”, Warwick Business School, UK, shared research finding that women outperform men at investing, concluding that men are more likely to pick more speculative stocks and female investors have a more long-term perspective. In particular, the researcher Professor Neil Stewart concluded that female investors were less likely to indulge in the "lottery style" of investment that appealed to men, defined as a tendency to invest in more speculative, lower priced shares that might increase in value substantially, along with a desire to keep to shares that show a loss while selling off their winners – the ones that have actually increased in value.
I love the combination of these ideas above because they are the essence of what we teach at Online Trading Academy:
- Being contrarian: don’t buy when everyone is buying or sell when everyone is selling … don’t buy, hold and hope like many people are doing … in fact don’t buy or sell at current price at all … instead, identify supply and demand zones some distance from current price, set a potential trade entry and exit and see if price comes to you.
- Planning purposefully, more holistically and less riskily: develop a trade plan … that’s like doing strategic planning for your trading and investing … in particular get clear about your trade plan goals, style and risk tolerance, as the foundations for good risk management.
- Avoiding lottery style investing: all of our education starts from foundations of risk management to avoid the tendencies towards a get-rich-quick lottery mindset. If you are guessing, you are gambling. The key is education.
So, women (and men) those are some of the rules to becoming a better trader and investor.
The OTA Research Center collects, collates and comments upon public domain research and perspectives that it feels may provide interesting insights. This content is provided for information only and OTA makes no representations about its accuracy.