Today, women has come a long way and have closed the income gap with men and have much disposable income for investment. We applaud women for their achievements. However some women is believed to still stay shy of investing.
Assets and businesses
Men tend to have more income generating assets. Among all companies in Singapore, more than 70% are currently owned by men at its helm.
It boils down to personality traits that dictates risk tolerance.
Different Personality Dictates investment temperament
Men and women have different persornality traits and hence different investmetn styles. Myer Brigges Type Indicator (MBTI) can easily help you understand your personality.
The MBTI seperates people into 16 types, based on: –
· Extroversion (E) vs Introversion (I)
· Sensing (S) vs Intuition (E)
· Thinking (T) vs Feeling (F)
· Judging (J) vs Perceiving (P)
Women tends to come up mostly as Feeling (F) and Judging (J).
Men and women come up almost balanced on Sensing (S) the need to see facts and figures and touch versus Intuition (E) the ability to interpret the data and make sense of it.
Most men fall into the Thinking (T) while Women fall into the Feeling (F). Thinking tends to be more logical while feeling tends to be more emotional and social based.
Most women came up in Judging (J) while men came up with Perceiving (P). A judging person will tend to judge quickly based on immediate circumstances, such as “investing is dangerous” from news of a company has gone bankgrupt causing investors to lose their money. A perceiving persion (P) tends to constantly keep their minds open to new information and options.
Woman who comes up with (F) and (J) in MBTI
I will focus on 2 personality trait that women should be aware of.
If you come up with Feeling (F) in MBTI, you are more people focused, and could be more emotional about people and things and events, you will need to control your emotions when investing. If you feel that this share is good, you may have emotional attachment and refuse to cut loss even when all the data tells you to do so.
For those who come up as Judging (J), you tend to judge a situation from a long time ago and stick to it. You will need to keep an open mind as new data becomes available.
What is the best way to invest?
Risk Adjusted Returns approach
The best way to invest is to measure the risk adjusted return for every investment opportunity. How much return am I getting for taking this risk?
· If I can make 10% a year on this investment, but I have a 10% chance of losing this capital. versus
· If I can make 20% but have a 50% chance of losing my 100% capital. This may not be a better investment.
The first one is a better investment. Take a look at historical returns versus risk of defaults and gauge your returns.
For women who are constantly fearful of losing their capital.
Choose insurance linked savings plan that guarantees a return. Insurance companies are highly scrutinized and well capitalised, and in many cases, as safe as banks.
For women who is the “judging” type.
Look for a good financial advisor or planner or a male member of your family who is financially literate to discuss with, so you can see the other perspectives and possibilities.
For women who is more “Feeling” centric
You should identify what you should or should not do, such as, “Should you invest in a tobacco company”? Or do you want to invest only in companies that make the world a better place? After setting your baseline you may start looking. Avoid buying shares or other exotic financial products as a “Feeling” person could become greedy and buy at the peak or panic and sell at the bottom.
Investment is often a logical (sometimes perceptive and intuitive) but otherwise emotionless activity. You should be hopeful, but should preferably be devoid of fear or greed.
1. Set aside funds for investing each month. (Cut your credit cards)
2. Understand your personality trait that can affect your investment decisions.
3. Be unemotional, logical and thinking. Cut out the “Feeling” and the “Judging” from your investment decisions.
4. Use a Risk Adjusted Returns approach. Always ask these questions and if you get good fact based answers, you will be fine.
· How much yield/return can I get?
· What is the default probability of this investment?
· What is the probability of capital gains/losses?
· What is the time horizon?
5. Invest in businesses or assets that generate cash flow.
6. Appoint a financial advisor or male member of your family (because men typically has the T & P trait but women who has T & P trait too is good) who is financially literate to assist you to review your investment plan.
7. Or do it yourself.