Women tend to outperform men when it comes to investing, but they fall behind when it comes to confidence in their ability to manage money. This is according to a new study from the Wells Fargo (WFC) Investment Institute.
Tracie McMillion, the head of the institute’s global asset allocation strategy, and Veronica Willis, an investment strategy analyst, co-authored a new report called “Why women make great investors.” The study looked at investment accounts from December 2010 to December 2015. During that period, female investors outperformed the men by a small absolute margin. On a risk-adjusted basis, women had higher average returns than the men.
What McMillion and Willis also found is that women possess three key traits that make them better investors.
Women trade less frequently
First, women are patient when it comes to their investments. The study found that women trade 27% less frequently than men. This willingness to stick to investments and lower trading activity benefitted the female investors.
This long-term approach to investing could benefit women, especially since they live, on average, five years longer than men, the study notes.
Meanwhile, men jumping in and out of positions could point to them being overconfident in their ability to trade and time the market, the report noted.
“Psychological studies show that overconfident investors tend to believe that they know more than they actually do, and that tends to result in more frequent trading. Frequent trading exacts both direct and indirect costs than can dampen returns,” McMillion and Willis wrote.
Related to the confidence, only 42% of women surveyed rated themselves in the “higher experienced” category, while 60% of men placed themselves there.
Women are more disciplined
Another positive trait found in women is that they tend to be more disciplined.
“Our findings show that women tended to have a more disciplined approach to investing that may have contributed to their stronger risk-adjusted returns compared with men,” McMillion and Willis wrote.
“For example, Betterment found that male investors tended to invest 100 percent of their accounts in stocks at least twice as often as women. They also are six times more likely to make massive allocation shifts- switching from 100 percent stocks to 100 percent bonds or vice versa.”
Women are willing to learn
Women have also benefitted from their willingness to learn and seek help.
“Women are more likely to seek education and advice from investment professionals,” McMillion and Willis wrote. “In our 2014 survey, twice as many women indicated what they need most from a financial advisor is education about investing principles and concepts.”
As for expected returns, 42% of women expected to earn 3% or less on their investments in 2016, while only 33% of men expected a similar return, the report found.
Women are also more fearful of a market downturn. Only 26% of retired women think that the stock market is a good place for their money, while close to half of the men believe it’s where they can grow their assets.
The takeaway from the report is women have a lot to be more confident about when it comes to managing their money. They’re taking the right steps such as investing for the long-term, not trading in and out of positions, and seeking education and advice from a financial adviser.
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.