I read an interesting BBC article yesterday (11 August) about a young woman who had managed to get on the property ladder with a little help from the stock market.
Admittedly, that’s not particularly interesting in itself. The stock market is a well-known wealth-creating machine that has helped countless investors make life-enhancing returns, especially for retirement.
Sadly though, only 26% of British women invest, according to data cited by the BBC. That’s a lot less than men (41%).
But the interesting bit for me was that analysis of accounts by Fidelity International shows that women achieved cumulative returns of 50% over three years compared to 47% for male customers.
Other industry data and academic studies report even wider performance gaps. But why is this?
Potential reasons
There appear to be a couple of key reasons for this. One is that men trade in and out of positions far more frequently, often twice as much, racking up fees along the way that negatively impact performance.
The reason for this is probably that men take on more risk chasing higher returns. This is hardly surprising from an evolutionary standpoint, as males on average tend to have a higher tendency toward impulsive behaviour and risk-taking.
Tragically, this plays out on roads as well as portfolios. According to 2024 date from the Department for Transport, 76% of road fatalities and 61% of casualties were male.
Men are also far more likely to have gambling problems and engage in risky sports, including cliff diving and freediving. You get the point.
Finally, data suggests that women have a more patient focus on long-term investing goals.
Women appear to place relatively greater weight on where their money is going and what impact it might have, as well as the reassurance that an investment is right for them…Our research suggests men are…more readily attracted by the potential financial return.
Anna Macdonald, Hargreaves Lansdown, cited by the BBC.
The takeaway here for me is that women appear to have a more intuitive understanding of Warren Buffett’s famous rule on investing: “Rule number one: Never lose money. Rule number two: Never forget rule number one“.
An ETF to consider
Naturally, every person is different, with their own individual investment strategy. But for those — female or male — who want to take a more cautious approach, rather than buy individual shares, I think the iShares UK Dividend ETF (LSE:IUKD) is worth a look.
What makes this exchange-traded fund (ETF) less risky is that it holds 50 different stocks. Specifically, these are the highest-yielding dividend shares across the FTSE 350.
