"LIFE is either a daring adventure or nothing at all." Helen Keller, The Open Door
If I ask you to think of a famous financier, what names come to your mind? John Pierpont Morgan, Jack Bogle, Warren Buffett may pop up - and they are all male. (They also find themselves in the dubious company of male financial villains who are top of mind - think Bernie Madoff or fictional character Gordon Gekko - with "greed is good" badges to boot.)
The irony is that women often make better investors. There have been numerous studies conducted over the years that offer data as proof, even though both men and women fail to accept this. In the month of International Women's Day, it's time to dispel these dated gender stereotypes.
Fidelity conducted a study in 2021 in the US, where it reviewed the investment patterns of 5 million customers over the last 10 years. It found that on average, female retail investors consistently outperformed their male counterparts by an average of 0.4 per cent every year.
Let's put this in numbers to make the point. If a man and a woman equally started out with US$100,000 each, and made an average annual return of 6 and 6.4 per cent respectively, the woman's investment portfolio would be worth over US$68,000 more after 30 years.
And yet, only 9 per cent of those surveyed by Fidelity said they thought women were better at investing than men, which runs contrary to the science.
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The stereotypical assumption is that women are more risk-averse than men on average, since risk-taking is associated with masculine traits and fuelled by testosterone.
So it is possible that risk has been too narrowly defined, and seen from a male lens.
Our data suggests that women in fact are more aware of risks, but wrongly suffer the negative and biased label of being risk-averse. Our female clients generally have less of a trading mentality compared with male clients - they invest less frequently, and also redeem less often, even during periods of market volatility.
What does this mean about risk-taking from a female lens? A report from the Boston Consulting Group found that women seek to reach their goals with a high degree of confidence. On the face of it, that may look like lower risk tolerance and translate to a higher allocation in cash holdings. In reality, what they need is data to make an informed decision.
Women take a longer-term approach to investing and embrace a more holistic view when it comes to financial planning, focusing on goals-based investing rather than just short-term performance, especially when they need to plan for a longer life compared with men. This explains why they are less focused on short-term trading and timing the market.
It also means women want to better understand the risk-reward trade-offs and how the investments relate to achieving their goals.
Consider a 2011 study from the Columbia Business School that shows that gamblers may take big bets, but are not more risk-taking than other forms of activities. The point is that risk is specific to individuals' specific familiarity around a topic, before deciding how much risk they should take.
One perspective then, is that women can be more deliberate in investment decisions. At the start, that may make them more averse to uncertainty, but once they are armed with information and overcome the hurdle to invest, studies show that women are just as willing as men to embrace risk.
In truth, this fact-based approach to investing makes women less emotional as investors. Men have shown to be more sensitive to news events than women, where they are more likely to buy and sell as a result, and also spend correspondingly more on fees. Vanguard found that during the financial crisis, men were much more likely to sell their shares at lows in a panic - which meant big losses and missing the start of the post-crisis rally.
Our data shows that women want to seize financial independence and take firmer control of their finances. The proportion of female investors on the Endowus platform has jumped from about 30 per cent in January 2020, to 40 per cent in January 2022. Given the significant growth in our base of investors over the last 2 years, the big boost in our female investor base is heartening.
As a digital wealth platform, risk is something we spend a lot of time thinking about. Understanding how we tolerate risk is fundamental to investing, with the reward here of being compensated for deploying cash to grow your wealth against calculated risks.
It's helpful for us to delve into how male and female clients perceive risk, so we are best equipped to guide them in their pursuit for financial wellness.
The bottom line is that women on average make better investors - even though not enough do it, or recognise the fact. Risk aversion is not intrinsic to being female, and women tend to make investment decisions based on facts rather than emotions. They will arm themselves with information they need to meet their short and long-term investment goals.
In short, women got this - it's time to break the bias.
The writer is chief client officer of Endowus.com, the first fee-only digital wealth adviser to grow your CPF, SRS and Cash.
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