Ample economic literature suggests there are real differences between the sexes when it comes to trading and investing. The key takeaway from the research, as Matt Phillips once explained, is that pretty much everything on Earth, including financial markets, would run better if women were in charge.
The conclusion is grounded in repeated findings that women tend to have lower financial risk tolerance than men and make smarter, more calculated decisions about their investments. What’s more, women tend to be less competitive than men, who are disposed to competing even when they’re more likely to lose.
Though performance isn’t much different by gender in the professional investing world (especially when comparing US fund managers), new research from Stash, an investing app, suggests that at the individual-investor level, women may be wiser investors than men. Moreover, the findings dismantle stereotypes about the appetite women have for risk.
Analyzing self-reported responses from 640,000 users with a personal investment account, Stash identified various measures by which women are smarter, more reliable investors. The sample group was approximately one-third women and two-thirds men. (Stash notes that a majority of its users are male.)
Stash’s analysis suggests that female investors are more likely than men to think of themselves as risk-averse. However, their actual investment behavior counters this trope.
When users sign up for Stash, they’re asked whether they identify as low, medium, or high risk when it comes to investing their money. Among the sample group, nearly 90% of female Stash users identified a low or medium risk tolerance when they opened their account, as compared to 75% of men. “This means that female Stash users perceive themselves as less willing to make riskier investments, opting for less volatile stocks and ETFs—they want safer investments, in other words,” Alexandra Phelan, the Stash data scientist who led this study, tells Quartz.
The data, however, tell a different story: Both men and women hold an average of five different investments in their Stash portfolio, and roughly 50% of women have invested in higher-risk investments, just as men have. Similarly, both men and women have a roughly 85% to 15% portfolio breakdown of ETFs and stocks respectively.
“While female users are more likely to self-identify as conservative, in practice, the number of men and women who are willing to invest in riskier investments is nearly identical,” says Phelan.
But Stash’s analysis does find that male and female Stash users behave quite differently when markets become volatile. Stash examined its users’ behavior on two especially volatile days for markets in 2018—Feb. 5 and Feb. 8, when major stock indexes suffered big losses, moving into what Stash defines as correction territory. On those days, the men panicked: Men who use Stash were 87% more likely than women, on average, to sell an investment. That behavior continued through the following week, with the men remaining 76% more likely than the women to sell an investment.
“It turns out women acted more sensibly on turbulent days,” Stash concludes in its report. ”By selling after a market drop, men effectively locked in their losses. The market has since recovered.”
Of course, this is one study by one company. Many men are excellent, level-headed investors. Many women are not. But if anything, these findings ought to chip away at the confidence gap that keeps many women from investing in the first place.