Stock Market Video
Who Are the Better Investors, Men or Women?
Survival Is the Teacher of Imagination
In Case You Missed It
In this week's Stock Market Video, I talk about the great Triple Whammy of Europe, earnings season and slowing major economies that has the markets uncertain about which way to turn. Caution seems to be the order of the day. I also talk about investigating sectors as a way to build a watch list of stocks that are bucking the trend. Stocks discussed include: Ocwen Financial (OCN), Nationstar Mortgage (NSM), Amgen (AMGN), Biogen IDEC (BIIB), Dean Foods (DF), Catamaran (CTRX) and BioReference Labs (BRLI). Click below to watch the video!
There are people who think they understand women, and a few of them are even willing to make that statement in public. But I'm not among them. I've seen enough of the diversity in both men and women to believe that generalizing about the female character is slightly worse than useless. Heck, for what it's worth, I don't even understand men. And anyone who tells you that they understand either gender is on very thin ice, as far as I'm concerned.
But when it comes to stock investing, my research allows me to say with confidence that women are, as a group, consistently a little better than men at making money in the stock market. I can cite study after study, going back to 1998, showing that women's investment results consistently beat those of men by about 2%.
The reason usually given for this outperformance is that men just trade too much. Some combination of impatience and over-confidence leads (some) men to believe that they can interpret what's going on in the market and make changes that will help them make money. Maybe they hear a news story and try to figure out what company might stand to benefit. Or they think they can see where an economic tread is headed and they try to get ahead of the market. And sometimes, of course, they double down on stocks that have staged big corrections.
Unfortunately, most of what's going on in the market at any particular time is just noise, and trying to interpret it in such a way as to make money is a useless exercise.
Meanwhile, women investors are a little better at ignoring the day-to-day ups and downs of the market. That is to say, that they do nothing, and reap the rewards. And in the long run, avoiding things like herd-driven buying at the top and desperation selling at the bottom (which is apparently a male specialty) enables women to edge ahead in the long-term results column.
Speaking from the perspective of a growth investor, this makes sense to me. Without making any statements about either male or female character, I can say with confidence that doing nothing is often the perfect thing to do.
When markets are stumbling around on the runway and tripping over their own feet, there's not much percentage in trying to figure out when they might get organized and start soaring. But the temptation to predict the upturn might be too strong for whichever sex is more competitive, and I don't think it's hugely controversial to say that men, as a group, fit that description pretty well.
One nice thing about the market, though, is that it's quite willing to keep punishing competitiveness, impatience, overconfidence and every other kind of character flaw. It's nothing personal. You do the wrong thing and the market quite happily takes your money. No ruler across the knuckles or unseemly emotion, just a quick reduction in your capital.
It's certainly happened to me often enough over the years. (Sometimes I think that the origin of the word "correction" when it means a decline in a stock price refers to the market delivering a lesson to unskilled or unwary investors. It "corrects" your trading behavior ... if you're willing to learn the lesson.)
The obvious solution to the problem of correcting your approach to the market is to find someone to advise you who has done the research and learned the lessons for you. And it probably won't surprise you to hear that I think Cabot, especially in the form of the Cabot Market Letter, is the ideal place for growth investors, both men and women, to begin trading more intelligently and more successfully.
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Here's this week's Contrary Opinion Button. Remember, you can always view all of the buttons by clicking here.
Survival is the Teacher of Imagination
We all know "Necessity is the mother of invention." This appears to be its cousin, though I don't think it hits the mark as well. [Editor's note: This is also related to the Samuel Johnson quotation about hanging that gets misquoted all the time. The actual wording is: "Depend upon it, sir, when a man knows that he is to be hanged in a fortnight, it concentrates his mind wonderfully." And it's true that a looming disaster can put the imaginative and inventive part of your mind into high gear.]
In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
Cabot Wealth Advisory 7/9/12 - How To Diversify Without Clutter
In this issue, Cabot ETF Investing System editor Robin Carpenter explains the benefits of diversification for your portfolio. He also tells you how it can be done without having to buy enormous numbers of stocks by using low-correlation sector funds.
Cabot Wealth Advisory 7/12/12 - What Makes Stocks Go Up?
In this issue, Cabot Stock of the Month editor Timothy Lutts answers a couple of very well-informed questions about one of his stock picks and defines different terms for markets in decline. Stocks discussed: Concur Technologies (CNQR) and Cerner (CERN).
Have a nice weekend,
Editor, Cabot Wealth Advisory