Men can benefit by understanding why women are often better investors, writes Peter Watson.
Women are better investors than men. It is not because of what women do but what they do not do.
Let us consider what is known about investing. Excess trading can reduce your investment returns.
Despite how confident you are about being able to profit from trading stocks, unfortunately excess trading does not usually lead to better outcomes.
Research shows that overconfident investors trade more frequently. When it comes to finance, men are more confident. As a result, men trade more often than women.
Respectively, male-over confidence that leads to excess trading can do more harm than good.
Men trade 45 per cent more than women and that reduces their stock returns by 2.6 per cent. Women trade less and that only costs them 1.7 per cent.
While a man could consider excess trading to be bold, women understand that investing requires patience.
On a relative comparison, single men are significantly more confident than single women and as a result their underperformance is worse than the figures mentioned above.
This information can be useful for how you might consider managing your investments. I recommend taking a longer-term approach to investing.
Trade when your circumstances change or when it is time to rebalance your portfolio back to your target balance between how to divide your assets between stocks and bonds.
Some trading is needed, but too much should be avoided. Also, excess trading can lead to increased trading costs. Plus, in taxable accounts it could generate an income tax liability.
Try to resist the temptation to be an active trader.
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com
