Why Warren Buffett and women share the same investment strategies

What does legendary billionaire investor Warren Buffett have in common with women?

Mr Buffett and women invest better than the average man, according to LouAnn Lofton’s 2012 book Warren Buffett invests like a girl And why you should, too.

Berkshire Hathaway President and CEO believes in long-term value investing and the power of compound growth, investing only in what he understands and says excessive portfolio diversification can be dangerous . The “Oracle of Omaha” advises investors to stay the course and focus on fundamentals, as well as put money in passive index funds. It is these characteristics that women also display when investing, according to financial experts.

“Women investors are often more risk averse than men. They are more comfortable – and like the idea – of investing for long-term success rather than seeking high-risk, short-term strategies, ”says Carol Glynn, founder of Conscious Finance Coaching.

Women like to spend minimal time on their investments and don’t always want to monitor their portfolio closely and on a regular basis, she adds. In comparison, men tend to change their investment portfolios more frequently.

Male investors are also “looking for ways to invest now and earn big wins quickly so that they can cash out and use the money to reinvest in something else to multiply it as quickly as possible,” Glynn adds.

Men trade an average of 13 times a year while women trade nine times, according to a study by Warwick Business School. Echoing these findings, a study by financial services firm Fidelity International found that, on average, men are 35% more likely to do trades than women.

“The attitude of women towards trading and saving to achieve financial independence is less proactive than how alpha men may choose to invest, although switching to a passive strategy appears to offer higher returns to long term, ”Arun John, chief market analyst at Century Financial, said.

Shina Mahajan, a 37-year-old Indian expatriate in Dubai, endorses this strategy. She has been investing in stocks and bonds through index and real estate investing for the past three years.

Ms. Mahajan, who has lived in the UAE since 2016, read online resources, articles and a few books to learn about investing. She also connected with SimplyFi, a non-profit community of UAE investment enthusiasts, to improve her understanding of how to build a low-cost portfolio and choose diversified funds.

Women investors are more comfortable and like the idea of ​​investing now for long term success rather than looking for high risk short term strategies

Carol Glynn, Founder, Conscious Finance Coaching

Armed with this information, she also set up an emergency fund, temporary insurance and drafted a will.

“My investing style is to choose global index funds with stocks and bonds in an allocated ratio and make regular contributions regardless of long-term market conditions. They should require minimal supervision, ”she said. The National.

“Passive index investing is the easiest, cheapest and easiest way to invest.”

Ms. Mahajan does research before investing as it helps her understand the risks and growth associated with an asset class. She will begin to dip into her wallet 12 years from now to pay for her children’s education, but rebalance the asset ratio as needed.

However, traditional financial markets, systems and products are not designed to meet the needs of women and their long-term investment strategy, according to Jessica Robinson, author of Financial feminism: a woman’s guide to investing for a sustainable future.

“Take, for example, the current obsession with cryptocurrencies. I’m afraid the panic and flurry is often fueled by the focus on short-term financial gains, ”says Robinson.

“This does not suit many female investors who wish to feel connected to building a world based on their values ​​- a more just, more equitable and more sustainable world.”

Women’s wealth in the Middle East is expected to grow at a compound annual growth rate of 9% through 2023 and wealth managers need to change their culture to become more inclusive, according to a report by global consulting firm Boston Consulting Group.

Women around the world are highly motivated to think about impact in their investment decisions – invariably, those impacts have some sort of environmental and societal dimension, adds Ms Robinson, who also launched Moxie Future, a platform for education, information and community that aims to empower women. as sustainable investors and “financial feminists”.

The investment industry needs a huge wake-up call, as many women feel underserved and disengaged by the industry, she says.

The mainstream media belittles women’s relationship to money, and investment products and services are designed, by default, through a male lens.

Jessica Robinson, author

“Women often report feeling patronized or denounced by financial advisers, mainstream media belittles women’s relationship with money, and investment products and services are designed, by default, through a male lens,” Ms. Robinson.

In 2018, a language study from the UK-based Starling Bank analyzed the difference between the way the media talk to their readers about money.

He revealed that women are often referred to as “excessive spenders” and encouraged to save. They were advised to “limit, restrict and better control the shopping spree”. On the other hand, men “dare” to invest, “to spend” to achieve “power” and it is understood that financial success will make him “more man”.

The gender investment gap deserves as much attention as the gender pay gap, says Robinson.

“Many women save less for retirement and park more in cash. The reality is, if you don’t start investing, you may well be missing out on potential financial returns.

Women’s portfolios are generally dominated by less volatile assets such as real estate, precious metals and mutual funds, while men’s portfolios are more likely to be dominated by stocks, according to John of Century Financial.

Ms Glynn agrees, saying that women often tend to stick with an asset class they are comfortable with, believe in or understand, such as stocks, bonds or property. They are also more likely to seek help from an advisor in telling them what to invest in, while men are more likely to talk to each other, seek out and speak to an advisor just to confirm their understanding, he adds. it.

However, she says some of her clients have diverse portfolios, are interested in new investment opportunities, do their own research, and invest when they feel it suits them and fits their investment strategy.

“It really depends on the individual, their level of investment confidence and often what they’ve been exposed to when it comes to investing growing up,” says Glynn.

“Women are in the game for the longer term and tend to avoid ‘lottery’ type speculation. Men are more likely to buy stocks at a low price, which helps explain the modern phenomenon of memes stocks, which women choose not to maintain because of their short bull run, ”says John.

In a 2009 study, investment platform Vanguard looked at the 2008 global financial crash and found that men were more likely to panic and sell below, while women, who tend to being calmer, more patient, and having a longer perspective, didn’t. .

Women are in the game for the longer term and tend to avoid ‘lottery’ type speculation

Arun John, Chief Market Analyst, Century Financial

Meanwhile, female investors are also more skeptical of new types of assets, experts say. They will invest in assets such as cryptocurrencies “but on a much smaller scale and a smaller percentage of their portfolio than men,” Ms. Glynn says.

According to data from February 2021 from the investment platform eToro, only 15% of global Bitcoin traders are female. The situation is similar with Ethereum, which saw the percentage of female investors increase slightly to 12% from 11% at the start of 2020, eToro added.

“Men tend to be more adventurous and less risk averse when it comes to investing and often want to invest in different types of asset classes, while women are less aggressive,” says Glynn.

Women often follow strategies that their parents believed in and instilled in them. The motivation is usually to invest to increase long-term wealth with as little involvement as possible, she adds.

“This is why investing in exchange traded funds and bonds tends to be such a popular option. When investing in investment property, women tend to want to invest in a location where they have family nearby to help them manage it. “

Posted: Apr 6, 2021 8:30 AM


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