Can a Girl Invest in Stock Market?
Only
one in every eight women makes her own financial decisions. The last seven
provide men control over their financial lives. It's a shame because women are
better at investing and managing money than males. LouAnn Lofton outlines why
women are better investors than men in her book Warren Buffet Invests Like a
Girl. They spend more time investigating their investing options rather than
chasing returns or making hazardous trades on the spur of the moment. Women are
also more inclined to seek professional guidance and to seek out information
that contradicts their beliefs. "When it comes to investment decisions,
women are a lot more deliberate and comprehensive," says Hena Mehta,
co-founder of Basis, a tool that helps women get a handle on their finances.
It's
consequently perplexing that, despite having all of the necessary conditions
for stock market success, only one out of every four stock investors in India
is a woman. The only bright spot in this bleak figure is that it has climbed
fast in recent years. Only ten percent of ET Money users were female in 2016.
By 2021, this figure had risen to 26%. In the last two years, the percentage of
women who invest in equities has risen from around 16 percent to 25 percent.
The
XX chromosome's financial savvy extends to other aspects of money management as
well. Women are generally considered to be more cautious borrowers, having
lower default rates and delinquencies. In the United States, for example, 34 percent of male student loan borrowers are in default, compared to 26 percent of
female borrowers. In fact, women are responsible for more than two-thirds of
the $1.3 trillion in student debt in the United States. So, despite the fact
that the average female borrower has around $1,500 more in student loans than
male borrowers, males have a greater default rate.
In
India, the tendency is duplicated, with female borrowers having slightly lower
default rates than male borrowers. According to TransUnion Cibil data, women are
more creditworthy than males, with an average credit score of 720 compared to
709 for men. Furthermore, 61% of female consumers have a credit score of 720 or
higher. Only 56% of male consumers achieve this level of satisfaction. NABARD
chairman G.R. Chintala highlighted the explanation for the creditworthiness
disparity in an interview with IndiaSpend. "The finest borrowers and
repayers are women. They consider arranging cash from this Monday if repayment
is due next Monday. Men don't have the same mindset," he explained. Women
also appear to be more organized than men. Males make up a vast majority (68 percent) of taxpayers who file their taxes just a week before the deadline,
according to the tax filing service Cleartax.
What
investors can learn?
What
can women teach investors about investing? To begin, they must be less reactive
and more patient when making financial decisions. When the markets went into a
tailspin in March 2020, many investors panicked and redeemed at low prices.
SIPs were either skipped or closed entirely by mutual fund investors.
Male
investors, on the other hand, were more likely to do so than female investors.
Prableen Bajpai, Founder of Finfix Research & Analytics, recalls a male
client who supplied graphs from the Great Depression as well as news items
regarding a future recession. "He was certain that markets would continue
to collapse and booked losses around March-April 2020 with the intention of
re-entering at lower prices," she explains. As markets rose and eventually
reached new highs later in the year, he never got the chance. When the
Covid-induced tsunami hit the markets, none of Bajpai's female clientele jumped
ship. According to studies, women's portfolios outperform men's because they
are less reactive to events.
"Consistency
is a virtue when it comes to investing. According to Mukesh Kalra, CEO of ET
Money, "this habit helps investors achieve their goals and even aim for
bigger ones." The market has been shaken by the conflict in Ukraine, but
investors must remain calm. "This is a fleeting phase," says Dipika
Jaikishan, co-founder of Basis. "An imminent war does not affect the
fundamentals of companies."
Take your time
At
the same time, investors should avoid becoming overconfident. In the stock
market, overconfidence is a particularly dangerous trait. Biology has its own
tricks up its sleeve. Testosterone makes males more self-assured in their
talents. Because women have less testosterone than men, they are less likely to
take excessive risks in the financial markets. It is usually assumed that men
are more capable of facing dangerous situations than women. Women are
risk-aware, not risk-averse, adds Basis' Mehta.
It's
also worth copying the due diligence that women do before investing. Women not
only assess the benefits and drawbacks, but they also ask a number of questions
before making a decision. "Women aren't afraid to ask questions and are
usually quite receptive to hearing and understanding how things work,"
adds FinFix's Bajpai. A woman's decision to invest in equities can be delayed if
compared to men. But that's because she goes through everything in great depth,
thoroughly assessing the dangers and other factors, Mehta explains.
Avoid risky bets
Women
avoid hazardous ventures because they value safety and clarity. According to
one estimate, men make up 85 percent of cryptocurrency investors and traders in
India. Even in the equities markets, few women engage in high-risk activities
like intraday trading and derivatives. They also trade less frequently than
men. Risk aversion has its advantages as well. Women stock investors have a
small number of intra-day traders. It is a well-known fact that the majority of
stock traders and investors lose money. Women do not lose money since they do
not speculate.
One
important lesson for investors is to match their investments to their
objectives. "When men discuss investing, they generally talk about
the returns rather than the goal." In reality, Jaikishan observes,
"they rarely have any other objective than the returns." Women, on
the other hand, frequently assign a goal to their investment. Whether saving
for retirement, a vacation, or money to invest in the stock market, the
investment is obviously linked to the goal.
Women
investors' risk aversion makes them natural diversifiers. ET
Money's female investors have a near-optimal asset allocation. This
demonstrates their thorough awareness of the risks associated with each asset
class, as well as the importance of asset allocation in achieving the best
risk-reward ratio, says ET Money's Kalra. Investors should be cautious about
putting all of their eggs in one basket. Having an asset allocation that
matches their risk tolerance is a surefire recipe for investment success.