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Women investors achieve way better returns and surpass men by 40 basis points - Study

Published Apr 17, 2022

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It is hard to deny there is still a gap between men and women, especially when it comes to finances. Yet, when it comes to investing, women, just by being themselves, have some advantages over their male counterparts.

Some women may still experience the effects of the gender pay gap and slower career progress when compared to their male counterparts. This happens especially in organisations that are viewed as male-dominated like the financial services industry. However, Momentum Investments behavioural team found that female investment portfolios still outperform men.

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On average, the study found that women investors achieve positive returns and surpass men by 40 basis points, or 0.4%, which was derived from an analysis of annual performance across 5.2 million accounts between 2011 and 2020.

Sonja Saunderson, Chief Investment Officer, from Momentum Investments has found that her experience as a female investor in South Africa has been similar. “Women tend to take a longer-view perspective and trade less frequently. This reveals a more considered approach by women, with greater focus being placed on the realisation of a financial goal, rather than the thrill of investing. For instance, our studies have shown that the average switches performed per female investor is 3.2% less than the average switches a male investor makes.”

This gives women an edge as Momentum Investments’ latest Sci-Fi report found that shifting investments around during market volatility usually results in what is known as a behaviour tax.

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Behaviour tax is calculated as the difference in future performance between the funds switched from and the funds switched to. Overall, the rand value lost over the 2021 period analysed in this report was over R90 million, which equated to an annualised behavioural tax of 3.5%. In addition, Momentum Investments notes that females have a 7% lower behaviour tax on average compared to their male counterparts.

“Women need to realise that we can use our natural behaviours to our advantage,” says Saunderson. “If we are truly more risk-averse, that means we should focus on gathering more research on our investments and have the courage of our convictions. In the end, our portfolio performance will do the talking.”

It is also evident that when it comes to investing women do not place a major focus on the past performance of an investment fund, and this is not a key driver in their investment decisions.

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If women opt to play to their strengths, Saunderson believes they would soon realise that the qualities that make them a woman can result in superior investment prowess. The principles women naturally adhere to conform to the basis of Momentum Investments’ underlying philosophy of outcome-based investing.

“Staying invested over the long-term produces superior returns, which is why we follow an outcomes-based investment philosophy that aims to shift investors’ focus away from tracking performance and towards their personal investment objectives.”

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