Who Are the Best Investors? Your Guess Is Probably Wrong

An analysis of 8 million investors could give you a big surprise about who is best at managing money.

Who Are the Best Investors? Your Guess Is Probably Wrong Photo by aastock / Shutterstock.com

Despite an apparent lack of confidence in their investing abilities, women tend to earn higher returns on their investments than men do.

A recent survey found that only 9 percent of women believed female investors would have outperformed men last year. Yet women’s returns (6.4 percent) beat men’s (6 percent) by an average of 40 basis points — or 0.4 percent — in 2016, according to Fidelity Investment’s analysis of 8 million retail customers.

Women also saved more money than men last year. Fidelity found that women saved an annual average of 9 percent of their paychecks in workplace retirement accounts, while men saved an average of 8.6 percent.

Women also saved more money outside of workplace retirement accounts, such as in individual retirement accounts and brokerage accounts. They added an average of 12.4 percent of their account balances, while men added an average of 11.6 percent.

Each of these differences between genders might seem negligible on its own, but the combination of even minor increases in savings rates and investment returns over time can make a significant difference in the size of your nest egg at retirement.

Fidelity found that a woman who saves 9 percent of her paycheck and generates a 6.4 percent annual return rate would have anywhere from 8.4 percent to 15.4 percent more in retirement savings by age 67, depending on her income and when she started investing, when compared with a man who saves 8.6 percent of his paycheck and generates a 6 percent annual return rate.

Fidelity is not the first to find that women tend to be better investors than men.

Last year, the online-based investment adviser SigFig Wealth Management found that women’s median rates of returns had outperformed men’s returns by 40 basis points as well. That was based on a review of more than 50,000 accounts, compiled for CNBC.

SigFig’s findings were attributed to men trading more than women — by about 30 percent — and therefore paying more in fees.

CNBC cited reactions to stock market tumbles as an example of why women out-invest men. Tumbles prompt panic and selling, but generally prove short-lived. So investors who don’t panic and don’t trade out of that panic are generally rewarded.

As we note in “11 Tips for Sane, Successful Stock Investing,” reacting emotionally to stock market ups and downs is a rookie investing mistake:

“Remember: You are in this for the long haul.”

What’s your take on differences between men’s and women’s investing patterns? Sound off below or on our Facebook page.

Karla Bowsher
Karla Bowsher
I’m a freelance journalist and former newspaper reporter who has covered both personal and public finance. I've worked for a top 50 major metro daily and a community newspaper as well as ... More


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