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5How are women better than men in trading?Mar-04-2020

How are women better than men in trading?

Blog by – Mr. Dhruv Ajmera
Women’s day is right around the corner and we couldn’t help but wonder if women are, in contrary to public opinion, better at trading in the stock market. Sounds like a controversial claim, doesn’t it?

Well, while it raises some eyebrows and questions, it holds a certain amount of truth with actual facts backing it. As per evidence collected in a study by Warwick Business School, women outperform men by 1.8% at investing and trading activities. This is also owing to the fact that both have different consumer behaviour and ways of thinking, in general as well. These behavioural and psychological patterns lead to both sexes tackling investment and trading differently, just like how it makes them tackle other situations differently.

Another insight by the same study is that female investors tend to look at the stock market with a long-term perspective and that men are more likely to pick up on speculative stocks. Now, of course, this is one part of it. Surely, everyone reaches out to mutual fund advisors and stock market advisories to understand the market trends further. But, we have come down to a few more pointers that explain how women’s psychology aids them at being better traders than their male counterparts.

The ego
It is a fact universally accepted that the male ego often affects their judgement and how women have less of an ego than them. By being biologically wired to handle losses without letting it get to their egos, women are better able to handle financial losses as well.

Therefore, while a man might end up questioning his capabilities, a woman is more likely to look at the loss, address it and then analyse it to learn from it. It doesn’t mean that they end up not taking risks in this process, it simply means that they take more calculated risks, owing to the losses.

Learning
Similar to the above point, learning patterns too are affected by how men and women deal with things emotionally. All we do is affected by our emotions, it’s just that we don’t expect it to be a part of our financial endeavours.

Men, typically, are overambitious in their approach to learn more about investment services. On the other hand, women are okay with accepting not knowing certain trading techniques and financial topics within this vast universe of trading. This ensures they go out of their way to learn it better.

So, before they start their gamble, they do research, strategise and calculate a lot more. Women’s head-strong behavioural patterns work in their favour when it comes to learning about mutual funds or investment services.

Managing risk
Now that we have talked about just how much women tend to prepare before stepping into the pool of investment, it is safe to say that they tend to become more aware and well-versed in trading.

In the stock market, the more you learn, the better you get at not just analysing the risk factor, but also handling it. Of course, we all know that risk management is a big part of  investing, if not the biggest.
 
Physiologically, due to testosterone, men are more likely to dabble with risk. One can say, they practice it more since they get a kick out of it. Women do not project similar traits. And thus, just by how our bodies and minds are wired, women get an upper-hand in handling risks.

Emotionally contained
Women are more likely to put a hard stop somewhere down the line. A good-performing phase will not cloud her judgements with a state of euphoria and a bad-performing phase will not bring her down. This pattern is what works in the long-run and thus makes their perspective more suitable for this volatile and dynamic market. This, effectively, saves a lot of money and time for women.

There is one commonality in this article- that men’s ego is what comes in between them and their judgements. While men tend to take more risks, what yields more returns is the calculative behaviour that women showcase more.

This is essentially how women make better investors than men. And which is why you must have noticed more and more women becoming a part of investment advisory services, stock market advisories as well as mutual fund advisors. That is empowering on its own as it opens up more avenues to all other women who wouldn’t otherwise explore these areas!

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