Women turn out to be ‘better investors’ because they keep their spirits up – avoiding the ‘impatience tax’ that could cost you £200,000 in 30 years
With markets in disarray, many investors are tempted to sell their shares
But with this approach, there is a risk that losses will crystallize as the market is likely to recover
In 30 years this approach would cost impatient investors nearly £200,000
Alliance Trust says women are more likely to hold back than men
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People are getting impatient when it comes to their investment habits, according to a new report from Alliance Trust.
With inflation at its 40-year high, interest rates continuing to rise and markets in turmoil, it’s understandable to want to sell some investments and wait for better market conditions.
But investors considering selling risk crystallizing losses and paying an ‘impatience tax’ worth nearly £200,000.
In the face of market volatility, women have controlled their nerves much better than men, according to Alliance Trust research
Women have been more resilient in the face of market volatility, but are less likely than men to invest in general, according to research by the investment trust Alliance Trust.
Nearly a third of men in the UK have a stock Isa compared to 16 percent of women, while 19 percent have a SIPP compared to nine percent of women. The numbers are similar when it comes to cash savings accounts, at 68 percent and 66 percent, respectively.
Recent figures from Boring Money reveal that the gender investment gap in the UK is close to £600 billion, with millions more male than female investors.
The Alliance Trust research shows that more than half of women who do invest have invested less than £20,000, compared to 37 percent of men. In contrast, 39 percent of men have invested more than £50,000, while only 28 percent of women have.
But this approach to investing is justified during this period of market volatility.
Alliance Trust research shows that women are less likely to crystallize a loss when the market declines, as they are more likely to hold their nerves.
Nearly half of men (48 percent) have sold investments at a loss when they fell in value to try to contain their losses, while only 38 percent of women have done the same.
Despite being less likely to invest, women appear to be better investors
Similarly, 24 percent of men have reduced their regular investment payments compared to 21 percent of women, while 17 percent of men have stopped completely compared to 12 percent of women.
Mark Atkinson, head of marketing and investor relations at Alliance Trust, said: “While they are less likely to invest, women appear to be better investors. Their behavior implies a stable long-term investment strategy, without hasty reactions or impatient decisions.
This is likely to result in much better financial performance, protecting them from the ‘impatience tax’.
“In recent weeks there has been even more chaos in the markets, and the dramatic headlines could create a crisis of confidence for investors.
‘Holding your nerves is key; the best investment is one that is left alone for as long as possible. Patience will pay off; confident that the market will outperform cash in the long run, as always.’
Hold on: Investors can lose massively if they’re impatient, as the chart above shows
This understanding of how men and women differ in their investment approaches is part of Alliance Trust’s “impatience tax” campaign.
It categorizes “impatient” investors as those who sell a losing stock when the market falls, then buy it back at a higher price once it recovers.
It compares two hypothetical investors who have both invested £10,000 in Alliance Trust and added 10 per cent of the average national salary per month over the next 30 years.
The patient investor held out during market declines, while the impatient investor sold 25 percent of his stock when the market fell five percent in one day, then bought back when the market recovered 10 percent in one day.
Over this period, the impatient investor would have built up a pot of £217,884, while the patient investor would have up to £410,757, a difference of £192,872.
If this were extrapolated to UK investors – assuming an impatient investor has sold a quarter of his investments on a 5 per cent drop – it could cost UK investors £1.3bn in just 12 months.