In the previous article, we considered how a person’s biological makeup influences the way one trades. Between males and females, there are clear identifiable traits that demarcate the trading patterns. As the more dominant gender, males tend to be aggressive in their trading style while females are generally more even tempered.
Interestingly, author LouAnn Lofton who made it a point to study the different trading patterns, made a strong claim in her book Warren Buffett invests like a girl. Surprisingly, according to Lofton who approached Buffett to seek confirmation on this claim, Buffett did not shy away but instead agreed with Lofton’s claim!
So, what are some of the traits that women possess as a trader which Buffett himself endorses?
- Take fewer risks: Theoretically, riskier investments yield better returns. At the same time, riskier investments may also result in greater loss. On the other hand, the “average cost investing” approach may be a better option in the long run. In the same breath, choosing a company that practices regular dividend payouts may work out for the best as opposed to a volatile company that sees price fluctuations. As they say, slow and steady wins the race.
- Do the homework: Rather than give in to a feeling of superiority, women readily admit not knowing a lot. And thus, a willingness to do further research and study results in a trader who is better prepared and has counted the cost before embarking on a trade.
- Being less competitive: The need to outshine another in terms of making the right investment decisions that generate the highest returns is present in most male traders. Women, on the other hand, are not prone to chest thumping fests. Increased competitiveness in a trader may spur a person to take up more risks which may turn out detrimental.
- Knowing that pride goes before a fall: Overconfidence is the bane of many. Investors flush with overconfidence naturally overestimate their ability, making decisions without consulting further. Chances are these traders refuse to admit they’re wrong, sell winners too early, keep losers too long, buy on rumour, and hold heavily concentrated positions.
As they say what’s sauce for the goose is sauce for the gander. If the winning traits of a female trader are acknowledged by Buffett himself, perhaps it’s time to consider adopting some of them? What are your thoughts?
- LouAnn Lofton (2011): Warren Buffett Invests Like a Girl: And Why You Should, Too (Motley Fool) accessed 16 April 2014
- http://www.learnvest.com/2014/03/fact-women-are-better-investors-than-men-123/ accessed on 21 May 2014
- http://advisors.tdwaterhouse.ca/public/facilityfiles/tdfinkek2/d66912ed-feca-4727-bcf2-ff3875b4c90c.pdf accessed on 21 May 2014