Battle of the sexes

.

   By Guest Blogger Ryan Lewenza

.

Having worked on Bay Street for the last 25 years I know firsthand how male dominated our industry is. Thankfully this is changing as more women enter the investment industry and break through the proverbial ‘glass ceiling’. And based on recent findings from Fidelity, this could be a good thing for investors and the broader investment community.

Fidelity Investments recently published a report titled, 2021 Women and Investing Study, which had some pretty interesting findings and proof that women, generally, make for better investors.

Fidelity completed a detailed analysis of 5 million customer accounts over a 10-year period and found that women outperform their male counterparts by 0.40% annually. The critical factor behind this outperformance was their more disciplined and longer term investment approach by not trading the portfolio as much. Based on the study they found that female customers traded 50% less than their male counterparts and that this helped explain a lot of the better performance.

Well this statistical analysis supports our belief that investment success is driven more by years in the market versus trying to time the markets.

We talk a lot in these blog posts about the magical power of compounding and how investors who take a longer term approach and not let their emotions get the better of them, that this will go a long way in delivering better investment outcomes and ensuring financial goals are met.

Take a look at the chart below. It’s a simple return chart of the Dow Jones Industrial Average dating back to the 1970s. Over the last 50 years the Dow has returned an impressive 11.2% annually or a 24,445% total rate of return. Put in dollar terms, if you invested $100,000 in 1970 and let it grow over time and reinvested the dividends that it would have grown to $26 million. Ah, the power of compounding, how I love you so!

Invest for the Long-term

Source: Bloomberg

To further hit home the point take a look at this chart. It shows the impact to returns when investors miss the best days in the stock markets. Specifically, it calculates the returns on a $100,000 investment in the S&P 500 if fully invested over a 20-year period versus different scenarios if investors missed some of the best days in the markets. For example, if you missed the 10 best days in the S&P 500, $100,000 would grow to $316,414, far less than the $654,055 if fully invested over the 20-year time period. So missing the 10 best days in the stock market would have cost you $338,000 in gains. If you missed the 20 best days in the market the portfolio would grow to just $203,393. And so on.

$100,000 Investment in the S&P 500 over a 20-Year Period

Source: Blackrock; Days Missed Are Best Performing Days

Now you may be saying, “Ryan, who cares about a measly 0.40%”. Well, when compounded over years, it can translate into tens of thousands of dollars. Below I show the impact of this 0.4%. I calculated how much you would have after investing $10,000/year at a 7.4% return versus a 7% return. The 7.4% return portfolio would be $80,000 higher than the portfolio that earned 7%. So it adds up.

Difference in a 0.4% Annual Return

Source: Turner Investments

Assumptions: Invest $10,000 annually for 30 years at 7.4% and 7% returns

Let’s face it. Women are better than man in many areas and apparently this extends to the world of investing. So take a bow ladies, on top of looking after the kids and home, working and taking care of business, and contributing in other countless ways, you’re also earning better investment returns due to your more disciplined and long-term approach.

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.