Florbela Yates | Head | Momentum Investment Consulting | mail me |
The outcome-based behavioural qualities that make women better investors.
A recent study by the Warwick Business School, which analysed the behaviour and returns of 2,800 investors over three years, found that women outperform men by 1.8%. By looking at a range of criteria, the study was able to ascertain a number of significant differences between the genders when it came to their investment behaviour. The behavioural qualities displayed by women investors – many of which are aligned to an outcome-based approach to investing – may explain their superior performance.
After examining these behavioural differences the outperformance of female investors over their male counterparts comes as no surprise. The study found that, generally, women tend to take a longer-view perspective and trade less frequently. This reveals a more considered approach by women, with greater focus being placed on the realisation of a financial goal, rather than the thrill of investing.
Many of these same qualities which have resulted in women being superior investors to men, form the basis of our underlying philosophy of outcome-based investing. We know that staying invested over the long-term produces superior returns, which is why we follow an outcomes-based investment philosophy that aims to shift investors’ focus away from tracking performance and towards their personal investment objectives.
The case for staying invested has proven to be especially strong during times of financial market uncertainty and high volatility. This is because volatile markets increase the risk of buying and selling at the wrong time. By trying to time the market, investors therefore risk missing top performing days because it is often intuitive to buy when prices are low, but difficult or even impossible to correctly predict the best time to invest.
In fact, our research has shown that investors who stayed the course over a twenty-year period would have received nearly double the returns than their peers who missed the top 25 performing days over the past two decades.
To help investors take a more outcome-based approach, we advise:
Diversify
Investing money in various multi-asset funds with diverse strategies is the surest way to earn superior returns over time. As such, choosing a few balanced funds or CPI +5% funds will go a long way.
Compound your interest
The power of compounding is really the eighth wonder of the world, so ensure that you grow the money you save by investing it into a compound interest-bearing account.
Pay off your…
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Read the full article by Florbela Yates, Head, Momentum Investment Consulting, as well as a host of other topical management articles written by professionals, consultants and academics in the October/November 2019 edition of BusinessBrief.
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