Women make better traders than men, fact. They’re able to suppress and channel the most destructive emotions of greed and fear far better than men. Their ego is less of an obstacle, they’re far calmer under pressure and they cut losses more quickly. Also, being far better multi-taskers than men, they can cope with complex structures and concepts far better.
This shouldn’t take us by surprise as it’s been proven through many studies that women are instinctively better at managing basic household incomes, therefore extending that skill to squeezing value out of trading, or investing in markets and understanding the risks versus rewards, should come naturally. As to whether this skill is genetic, or developed through nurture and society’s conditioning and biases, is a subject and debate for another day.
The power and skill of women when trading and investing
Mrs. Watanabe is a famous reference which should always alert on the style of women trading. She was the matriarchal, archetypical Japanese housewife, who hunted down the best value and return for the family’s savings. Highly risk-averse, she became a player in currency trading during the past in her attempts to combat low interest rates in Japan. She was not looking for excessive returns through gambling by stock picking, but she played the currency markets in the most effective method known.
She became active in the so-called “carry trade”; a form of currency speculation in which investors borrow a low-cost currency like the yen and buy high-growth currency, netting a profit. Base interest rates in Japan are close to zero, or less than zero, whereas they’re currently 1.5% in Australia.
Admittedly it has been far trickier to identify inbuilt returns through the carry trade, as a monthly AUD/JPY chart illustrates. In December 2009 AUD/JPY was 58, in March 2017 it’s at a level of 84, having reached a recent high of circa 104 in October 2014. A more recent high being 88 in January 2017. Naturally Mrs. Watanabe would needed to have remained steadfast in her AUD commitment since 2009, but had she done so she would have enjoyed a return of circa 48% (non compounded), circa 6% a year.
Now obviously this is a crude estimation that does not take into consideration the fluctuating levels of domestic inflation, but the vanilla, simple data speaks for itself. Mrs. Watanabe strategy, since she didn’t panic and bought Aussie dollars shortly after the 2008/2009 financial crash effects were fading, beats many other investment strategies by not overthinking the markets. She simply saw a gap and exploited it. Could Mr. Watanabe have achieved the same result? That’s an interesting question.