Why women make great stock investors

Posted at 01/15/14 1:07 PM

MANILA, Philippines – There are innate female attributes and abilities that make women great investors at the stock market, according to author and former investment banker Rose Fres Fausto.

Citing behavioral economic studies, Fausto said these traits show that while most women are known for the being the stronger gender in terms of rearing children, they also have the capability of being savvy investors.

Less testosterone

Because women have lower level of testosterone, Fausto said this means they are taking less risks in life, which is key to being successful as an investor.

“We are the calmer temperament, so we are able to manage the risk. And investing is really all about managing risks,” she said on ANC’s “On The Money.”


Less overconfidence

Fausto said women are also less overconfident compared to men, which results to less irrational exuberance.

She said because of testosterone and exuberance, men have the tendency to trade more.

“There’s a 6-year-study that shows that men trade 45 percent more than women. To top that, the single men trade 67 percent more. So you can probably assume the wives were responsible for toning down the irrational exuberance,” she said.

Fausto said because of the less transaction cost of women, they are able to have a better net return.

More thorough

Fausto said another trait that gives women an advantage as stock traders is that they are detail-oriented.

Take time to study and are more immune to peer pressure, she said.

“If you are not affected by peer pressure, you may end up making better investment decisions,” she said, adding that women learn more from their mistakes compared to the opposite sex.

Fausto believes that women are not commonly known as great investors not because of the lack of capability, but because of the lesser number of women in the finance industry.

She said that in surveys she has conducted in various groups, it showed that the ratio of men vs. women in the finance industry is 70:30 (Fund Managers Association of the Philippines); 65:35 (BDO Asset Management); and 60:40 (Registered Financial Planners).

“It’s really not about capability, there are a lot of attitudes and temperament of women that make for good investors,” she said.

Fausto added that she believes the numbers are beginning to change as more and more women are taking up positions in the finance sector.

“Women are going out there already, they’re showing their capability and it’s about time,” she said.