Women ‘proving to be better investors’ as they hold their nerve – avoiding the ‘impatience tax’ which could cost you £200,000 over 30 years
- With markets in disarray, many investors are tempted to sell their shares
- But this approach risks crystallising losses as the market is likely to rebound
- Over 30 years, this approach could cost impatient investors nearly £200,000
- Alliance Trust says women are more likely to hold their nerve than men
People are becoming more impatient when it comes to their investment habits, according to a new report by Alliance Trust.
With inflation at a 40 year high, interest rates continuing to rise and markets in disarray, it is understandable to want to sell some investments and wait for better market conditions.
But investors considering selling out risk crystallising losses and paying an ‘impatience tax’ worth nearly £200,000.
Women have held their nerve in the face of market volatility far better than men have, according to Alliance Trust’s research
Women have been more resilient in the face of market volatility but are less likely than men to invest overall, according to the research by the investment trust, Alliance Trust.
Nearly a third of men in the UK have a stocks and shares Isa compared to 16 per cent of women, while 19 per cent hold a SIPP compared to nine per cent of women. The numbers equalise when it comes to cash savings accounts, at 68 per cent and 66 per cent respectively.
Recent figures from Boring Money reveal the UK gender investment gap stands at almost £600billion with millions more male investors than female.
Alliance Trust’s research shows more than half of the women who do invest have less than £20,000 invested, compared to 37 per cent of men. By contrast 39 per cent of men have more than £50,000 invested, while just 28 per cent of women have.
But this approach to investing has been vindicated during this period of market volatility.
Alliance Trust’s research reveals women are less likely to crystallise a loss when the market dips because they are more likely to hold their nerve.
Almost half of men (48 per cent) have sold investments at a loss when they’ve plummeted in value to try and stem their losses, while just 38 per cent of women have done the same.
Despite being less likely to invest, women are proving to be better investors
Similarly, 24 per cent of men have reduce their regular investment payments compared to 21 per cent of women, while 17 per cent of men have stopped entirely compared to 12 per cent of women.
Mark Atkinson, head of marketing and investor relations at Alliance Trust, said: ‘Despite being less likely to invest, women are proving to be better investors. Their behaviour implies a steady long-term investment strategy, without knee-jerk reactions or impatient decisions.
‘This is likely to result in much better financial performance, protecting them from the “impatience tax”.
‘The last few weeks has seen even more chaos in the markets, and the dramatic headlines may well prompt a crisis of confidence for investors.
‘Holding your nerve is key; the best investment is one which is left alone for as long as possible. Patience will pay off; trust the market to outperform cash in the long run, as it always has.’
Hold on: Investors could lose out massively if they’re impatient, as shown by the graph above
This insight into how men and women differ in their investment approaches forms part of Alliance Trust’s “impatience tax” campaign.
It categorises ‘impatient’ investors as those who sell a losing share when the market dips, only to buy it back at a higher rate once it recovers.
It compares two hypothetical investors who both invested £10,000 with Alliance Trust and added 10 per cent of the average national salary a month for the next 30 years.
The patient investor held on through market dips, while the impatient investor sold 25 per cent of their shares whenever the market dipped five per cent in a single day, and then bought back in when the market recovered 10 per cent in a single day.
Over this period, the impatient investor would have built up a pot worth £217,884 while the patient investor would be up to £410,757, a difference of £192,872.
If this was extrapolated across UK investors – assuming an impatient investor sold a quarter of their investments on a 5 per cent fall – it could cost UK investors £1.3billion in just 12 months.