What Men, Women Could Teach Each Other About Investing

By Matthew Amster-Burton

Who is better at investing, men or women?

Sorry guys, you lose this one. One of the most widely-cited studies on the subject is “Boys Will Be Boys” by Brad Barber and Terrance Odean. It concludes that women outperform men in their investment accounts significantly and the difference is most pronounced — more than 2 percentage points — when comparing single men and women.

Why? Because women simply behave better. They trade less, have lower portfolio turnover and don’t invest in individual stocks as much as men do. (Portfolio turnover, in particular, directly correlates with portfolio returns. In other words, the more you churn — the less you earn.)

Men and women differ not only when it comes to investment behavior, but in the investments they tend to pick.

SigFig, an investment adviser in San Francisco, recently looked into which securities are especially favored by male or female investors. Or, to put it in an a terrible but immediately comprehensible way, what are the “pinkest” and “bluest” securities — stocks, mutual funds and ETFs — among its users? (SigFig users are investors who sync their brokerage accounts with the company’s portfolio tracker.)

The Pink and the Blue

First, a quick explanation of the methodology behind determining which securities are “blue” and which ones are “pink.”

Roughly 80 percent of all SigFig users are men. So on average, each security is owned 80 percent by men and 20 percent by women. Any security whose ownership is more than 20 percent female goes on the “female-favored” list. At the end of October, 18 securities passed this test.

These “pink” securities show a mild bias toward health care investments: Vanguard Health Care Fund (VGHCX), Pfizer (PFE), AbbVie (ABBV) and Fidelity Select Biotechnology Portfolio (FBIOX). Overall, the female-favored securities break down as follows:

• Index funds and ETFs: 7
• Active mutual funds: 6
• Individual stocks: 5

The most male-dominated securities, on the other hand, include a lot of big-name individual stocks: Alibaba (BABA), Twitter (TWTR), Tesla (TSLA), Coca Cola (KO), Microsoft (MSFT), Ford (F). The breakdown goes like this:

• Index funds and ETFs: 7
• Active mutual funds: 0
• Individual stocks: 11

Performance Issues

The data alone doesn’t fully explain performance trends between male and female investors, but offers one logical reason why men underperform women.

The chart above shows the average unrealized return (gain or loss) for each security in the data set. Perhaps not surprisingly, individual stocks and certain ETFs — particularly those on the “blue” list — tend to land at both ends of the spectrum. Either investors holding these securities are currently enjoying unrealized gains as high as 40 percent, or nursing unrealized losses, as low as -10 percent.

What’s Going On?

We should be careful about drawing too many conclusions from this data. It’s based on a particular point in time, and the favorite holdings may already have shifted. And few of these securities show a large male or female bias. Everything we’re calling a “trend” could be a statistical artifact.

But let’s ask the question anyway: why do men tend to favor individual stocks?

It could be because they believe they can pick and trade them profitably, but it might also be because men (particularly men who use an online investing tool) are more likely to work at startups, tech firms, and other companies that pay them in stock. Twitter, for example, employs 70 percent men, Microsoft 71 percent.

The Takeaway

Women are more likely to hold active mutual funds and health care investments; men are more likely to hold ETFs and individual stocks — especially tech stocks. But the differences aren’t huge. And, as usual, we only know what we see among investors who use SigFig to track their portfolios. They may not be representative of investors as a whole.