For as long as I can remember, adding the phrase "like a girl" to the end of whatever you were saying was a put-down, an insult, something to come to fisticuffs over. Little boys the world over hated being told that they, for example, "threw like a girl." I'm not defending the statement, and as a member of the fairer sex, I certainly don't agree with its intent, but hey, that's been the case from the playground on up.
When it comes to investing, though, you could do a whole lot worse than learning to "invest like a girl." And that's why I'd bet Warren Buffett, chairman and CEO of Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) , wouldn't get offended if I told him to his face that he invests like a girl. In fact, he'd probably thank me (and perhaps slip me a box of See's Candies). Hang on to see why -- and stay tuned for our soon-to-be published book (June 21, 2011!) on this very topic.
What makes Buffett Buffett
What is it that makes Warren Buffett such a consistently phenomenal investor? Is it that he's zigging and zagging along with the market's every move? Is he trading all the time, buying this and selling that, racking up taxes and commissions all the while? Is he moving into and out of the markets in a testosterone-fueled frenzy?
No, no, and no -- what makes Warren Buffett the investor whom every investor wants to be like is that he approaches investing differently from the way most men do. Buffett has famously said that temperament is more important when it comes to investing success than is intellect. And his temperament tends to be more feminine than masculine.
He's patient and does thorough research. He doesn't buy the latest whiz-bang technology company that he can't understand. He doesn't take excessive risks. His goal is to never sell the companies he invests in. He doesn't do something just to do something. He's the anti-trader, if you will.
Yep, you heard it here first -- Warren Buffett invests like a girl. And that's a very good thing.
Women and investing
So how exactly do women invest? Check out just a few of the characteristics of female investors that distinguish them from their male counterparts.
- Women spend more time researching their investment choices and tend to take less risk than men do. This prevents them from chasing "hot" tips and trading on whims -- behavior that tends to weaken men's portfolios. Women are also more likely to seek out information that challenges their assumptions, rather than only relying on data that confirms what they already thought.
- One study found that men trade 45% more often than women do, and although men are more confident investors, they tend to be overconfident. By trading more often -- and without enough research -- men reduce their net returns. But by trading less, women produce better returns and also save on transaction costs and capital gains taxes.
- Women have less testosterone than men do (not a surprise, we know). New and continually unfolding science points to the possibility that testosterone is responsible for herd-like risk-taking behavior from men in the financial markets. That makes a lack of it a decided asset.
These are some of the traits that make female investors more like Buffett and less like frazzled, frenetic day traders, with their ties askew, hair on end, and eyes bleary. Patience and good decision-making help set women apart here. (There are others, naturally, but you'll have to wait until Warren Buffett Invests Like a Girl: And Why You Should, Too is published this summer to see them all.)
So what if you're not a girl?
It's possible, dear reader, that you're of the male persuasion, but don't fret. By focusing on the traits that created superinvestor Warren Buffett's exemplary temperament -- patience, the willingness to dig deep, and the desire to buy and hold instead of trade, trade, trade -- you can awaken the feminine side of your investment psyche. Consider it. Your portfolio will thank you for it.
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Omaha on my mind
I may get the chance to ask Buffett himself how he feels about "investing like a girl" this weekend when I attend the Berkshire Hathaway annual meeting. Follow along with me on Twitter (@LouAnnLofton), our "Invest Like a Girl" Facebook page, and right here on Fool.com for updates from Omaha to see if I pull it off! And if you're going out to the annual meeting, stop by Robert Miles' author reception Friday at the University of Nebraska at Omaha (Mammel Hall) from 6-8 p.m. I'll be attending it alongside other authors like Roger Lowenstein, Andrew Kilpatrick, and Lauren Templeton. Come say hello and enjoy a free Dilly Bar with me!