Women are better at investing in the stock market than men. Not my words, but those of a curious article that popped up on the BBC homepage the other day. While the article was not without flaws in my opinion (as I’ll get to), the thesis was stated loudly and clearly: women beat men in the stock market. That is to say, their choices for stocks and shares lead to better returns and more wealth.
How true is this claim? What might be the reasons for women winning this particular battle of the sexes? And what lessons might be gleaned for investors of all shapes and sizes (and genders)? Let’s take a look.
The research
First off, the data notes that while 41% of British men invest, only 26% of women do. So there is a possible selection bias here.
Nevertheless, the finding is, as the article states, that women achieve “slightly higher long-term returns” than men. The data cited shows that over a three-year period, women achieve a 50% cumulative return (equivalent to 14.5% annualised) and men a 47% return (13.7% annualised).
The main reason given for the discrepancy is that men make twice the number of trades as women. This is in line with what many say about stocks: that frequent buying and selling is more akin to gambling than investing – not to mention the costs of trading fees bringing down the overall return. I think that’s a lesson we can all benefit from.
But here’s my issue with the article: the use of the word “long-term”. Is three years considered long-term investing? If you ask me, not at all.
At The Twelfth Magpie, we espouse buying a stock with the intention to hold for 10 years or more. A typical investing timeline – a person’s investment period over their career/life – is 30 years! Comparing the returns on investing over a tenth of that time is a bit silly, in my view. (Perhaps the study needs to be revisited in the 2050s?)
One to consider?
One stock that would have been better to hold over the long term was Rolls-Royce (LSE: RR.) shares. I remember when it jumped 100% after the pandemic and there were calls from some quarters of a good exit point. This kind of short-termism would have meant avoiding the FTSE 100‘s best run of the 2020s (so far!). Those who took the profits early missed a stock rising over 1,500% in around five years.
The firm has plenty of room for growth today, too. While risks like a pandemic grounding planes must be considered, the firm’s position manufacturing aeroplane engines in a market with high barriers to entry is enviable. Throw in thriving divisions in Defence and Power Systems, and you’ve got a company with not just one string to its bow. The future possibility of SMRs – mini nuclear power stations – looks exciting too.
