This may surprise you if you did not already know, but studies have shown that female investors are typically better investors than males. Mostly, it has to do with the way we are wired and how we respond to events. Barclays Wealth and Ledbury Research are the authors of this study that explains why women are better investors. We are able to make more money in the market because we don’t take on as much risk.
Think about it, remember the kid in school that used to jump off the side of the playground wall? Or how about the little boy who always took any dare to eat random stuff? Does that sound smart to you? It’s pretty risky to eat the old bologna that’s been on the sidewalk for 2 summers but boys will do it because they like to take risks. Women are more likely to take calculated risks. Calculated is the key word. The study concludes that “Women were more likely than men to have a greater desire for self-control.” That makes sense to me.
So how can you use this to your advantage? Here are a few ways you can make money in the stock market by taking calculated risks.
Don’t Go All In
There’s a phrase called legging into a position. That just means that you don’t put everything on the table as soon as you’re ready to invest in a stock. The first thing you want to do is figure out what size position you plan to take. Is it going to be 20% of your portfolio, 10%? Then you break up your buying in chunks in order to take advantage of dollar cost averaging. That way you are getting an average cost as you move into the trade. Imagine how much better it would be if you leg into a trade if the market happens to dip the next day.
Don’t worry about tiny market fluctuations or correction days. The market is going to ebb and flow just like the ocean. You realize this because you've lived with cycles since you were about 15. You know that down won’t be down for long and up won’t go on forever. So if you see a market dip take that opportunity to step back and reevaluate. Is the stock still a good solid stock? Then take this as an opportunity to buy in at a lower cost basis or just sit back and ride out the storm.
Use Your Emotions to Your Advantage
One of the strengths of women is that we use our heart and head to make decisions. It makes us better at seeing all sides of the argument. If you are panicky about your investments or you feel unsettled, think for a second. Is your intuition usually on point? Then take a second to really think about what has you unsettled. If it is just a fear in general that you can’t really put your finger on, try to take a rational approach and see what the issue is. If you’ve done that and you still have that gut feeling that something isn’t right, or that something is right, go with your gut. Especially if it has worked for you in the past.
What are your thoughts? Do you think women make better investors than men?
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Originally posted 2014-04-03 06:16:23.