Can a Girl Invest in Stock Market?


Can a Girl Invest in Stock Market?


Only one in every eight women makes her own financial decisions. The last seven provide men control over their financial lives. It's a shame because women are better at investing and managing money than males. LouAnn Lofton outlines why women are better investors than men in her book Warren Buffet Invests Like a Girl. They spend more time investigating their investing options rather than chasing returns or making hazardous trades on the spur of the moment. Women are also more inclined to seek professional guidance and to seek out information that contradicts their beliefs. "When it comes to investment decisions, women are a lot more deliberate and comprehensive," says Hena Mehta, co-founder of Basis, a tool that helps women get a handle on their finances.

It's consequently perplexing that, despite having all of the necessary conditions for stock market success, only one out of every four stock investors in India is a woman. The only bright spot in this bleak figure is that it has climbed fast in recent years. Only ten percent of ET Money users were female in 2016. By 2021, this figure had risen to 26%. In the last two years, the percentage of women who invest in equities has risen from around 16 percent to 25 percent.

The XX chromosome's financial savvy extends to other aspects of money management as well. Women are generally considered to be more cautious borrowers, having lower default rates and delinquencies. In the United States, for example, 34 percent of male student loan borrowers are in default, compared to 26 percent of female borrowers. In fact, women are responsible for more than two-thirds of the $1.3 trillion in student debt in the United States. So, despite the fact that the average female borrower has around $1,500 more in student loans than male borrowers, males have a greater default rate.

In India, the tendency is duplicated, with female borrowers having slightly lower default rates than male borrowers. According to TransUnion Cibil data, women are more creditworthy than males, with an average credit score of 720 compared to 709 for men. Furthermore, 61% of female consumers have a credit score of 720 or higher. Only 56% of male consumers achieve this level of satisfaction. NABARD chairman G.R. Chintala highlighted the explanation for the creditworthiness disparity in an interview with IndiaSpend. "The finest borrowers and repayers are women. They consider arranging cash from this Monday if repayment is due next Monday. Men don't have the same mindset," he explained. Women also appear to be more organized than men. Males make up a vast majority (68 percent) of taxpayers who file their taxes just a week before the deadline, according to the tax filing service Cleartax.

What investors can learn?

What can women teach investors about investing? To begin, they must be less reactive and more patient when making financial decisions. When the markets went into a tailspin in March 2020, many investors panicked and redeemed at low prices. SIPs were either skipped or closed entirely by mutual fund investors.

Male investors, on the other hand, were more likely to do so than female investors. Prableen Bajpai, Founder of Finfix Research & Analytics, recalls a male client who supplied graphs from the Great Depression as well as news items regarding a future recession. "He was certain that markets would continue to collapse and booked losses around March-April 2020 with the intention of re-entering at lower prices," she explains. As markets rose and eventually reached new highs later in the year, he never got the chance. When the Covid-induced tsunami hit the markets, none of Bajpai's female clientele jumped ship. According to studies, women's portfolios outperform men's because they are less reactive to events.

"Consistency is a virtue when it comes to investing. According to Mukesh Kalra, CEO of ET Money, "this habit helps investors achieve their goals and even aim for bigger ones." The market has been shaken by the conflict in Ukraine, but investors must remain calm. "This is a fleeting phase," says Dipika Jaikishan, co-founder of Basis. "An imminent war does not affect the fundamentals of companies."

Take your time    

At the same time, investors should avoid becoming overconfident. In the stock market, overconfidence is a particularly dangerous trait. Biology has its own tricks up its sleeve. Testosterone makes males more self-assured in their talents. Because women have less testosterone than men, they are less likely to take excessive risks in the financial markets. It is usually assumed that men are more capable of facing dangerous situations than women. Women are risk-aware, not risk-averse, adds Basis' Mehta.

It's also worth copying the due diligence that women do before investing. Women not only assess the benefits and drawbacks, but they also ask a number of questions before making a decision. "Women aren't afraid to ask questions and are usually quite receptive to hearing and understanding how things work," adds FinFix's Bajpai. A woman's decision to invest in equities can be delayed if compared to men. But that's because she goes through everything in great depth, thoroughly assessing the dangers and other factors, Mehta explains.

Avoid risky bets

Women avoid hazardous ventures because they value safety and clarity. According to one estimate, men make up 85 percent of cryptocurrency investors and traders in India. Even in the equities markets, few women engage in high-risk activities like intraday trading and derivatives. They also trade less frequently than men. Risk aversion has its advantages as well. Women stock investors have a small number of intra-day traders. It is a well-known fact that the majority of stock traders and investors lose money. Women do not lose money since they do not speculate.

One important lesson for investors is to match their investments to their objectives. "When men discuss investing, they generally talk about the returns rather than the goal." In reality, Jaikishan observes, "they rarely have any other objective than the returns." Women, on the other hand, frequently assign a goal to their investment. Whether saving for retirement, a vacation, or money to invest in the stock market, the investment is obviously linked to the goal.

Women investors' risk aversion makes them natural diversifiers. ET Money's female investors have a near-optimal asset allocation. This demonstrates their thorough awareness of the risks associated with each asset class, as well as the importance of asset allocation in achieving the best risk-reward ratio, says ET Money's Kalra. Investors should be cautious about putting all of their eggs in one basket. Having an asset allocation that matches their risk tolerance is a surefire recipe for investment success.

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