Why is this? I have a theory. And a warning: I’m about to paint with a very broad brush. This obviously doesn’t apply to all people.
My theory is that men are more likely to tinker. They’re more likely to have unfounded confidence about their ability to “make moves” or “trade” to beat the market. But study after study after study all show that the LESS you do in investing, the better your returns. They say your investment portfolio is like a bar of soap. The more you touch it, the smaller it gets.
Women, on the other hand, may have less confidence when it comes to investing, which counterintuitively serves them well. They pick simple investments, and leave them alone for a long time. That type of investing tends to perform better.
However, this Fidelity study also shows that women may be worse off by being too conservative. They hold too much cash, and don’t invest as aggressively. That can also hurt long term returns.
Optimal investing is quite simple. Buy and hold one to three index funds. My favorite number of index funds to buy is one. WHICH ONE? Either VT (the global stock market ETF) or a target date index fund based on your age (like VFIFX). That’s it. If someone had me analyze their million dollar portfolio and it only contained VFIFX, I’d be amazed and give them an A+. But more people don’t have the will to keep it so simple, so they add complexity and it hurts them long term.
Remember to keep your investments simple, stay the course, and leave them alone for a long time. Focus your efforts on making more, spending less, and contributing the difference to those same simple investments.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Jeremy
