Many women have a knack for complicating investing, but not because we mean to, rather female investors are just more likely to let their worries get in the way of their money decisions.
This year, local news has been largely dominated by global headlines. Worries have focused on US President Donald Trump across multiple fronts; will he be good for the world, good for economic growth, good for women?
Then there has been various terrorist attacks, and other surprise elections in the Netherlands, France and the United Kingdom.
There’s also tensions between Saudi Arabia and Qatar, and nuclear worries about North Korea.
“Most of this stuff is just noise,” says AMP Capital chief economist Shane Oliver in a recent note to investors.
“The global economy has had plenty of worries over the last century, but it got over them with Australian shares returning 11.8 per cent, per annum since 1900.”
From a purely biological point of view, women are more emotional than men. It’s the way many of us, not all, but many are made as we worry about the future particularly for our loved ones.
Women are also more cautious and more risk adverse investors than men which can result in them having less financial assets are retirement, according to Mercer.
Now, add to this the many issues that can complicate how we feel about investing, and then you have a recipe for hesitation and it’s holding women back.
Dr Oliver says what’s made investing more complicated over the years has been;
- greater product choice,
- regulations and rules around investing,
- the role of the information revolution and social media in amplifying the noise around investment markets and the expanding ways available to access various investments.
But at its core, Dr Oliver reckons investing is actually simple but you’ve got to get perspective around your emotions and worries.
“The swings we see in investment markets are far greater than can be justified by movements in investment fundamentals alone – ie profits, dividends, rents, interest rates, etc.
“Investor emotion plays a huge part,” says Dr Oliver.
“A bull market runs through optimism, excitement, thrill and ultimately euphoria by which point the asset class is over loved, and usually overvalued too, – everyone who is going to buy has – and it becomes vulnerable to bad news.
“This is the point of maximum risk.
“Once the cycle starts to turn down in a bear market, euphoria gives way to anxiety, denial, fear, capitulation and ultimately depression at which point the asset class is under loved, and usually undervalued, – everyone who is going to sell has – and it becomes vulnerable to good (or less bad) news.
“This is the point of maximum opportunity. Once the cycle turns up again, depression gives way to hope, relief and optimism before eventually moving on to euphoria again.
“The key for investors is not to get sucked into this emotional roller coaster: avoid assets where the crowd is euphoric and convinced it’s a sure thing and the asset is over loved, and favour assets where the crowd is depressed and the asset is under loved,” he said.
