By Kerry Hannon,
No doubt the title of this new book —Warren Buffett Invests Like A Girl And Why You Should, Too — grabs your attention. But no snickering allowed. Calling legendary investor Warren Buffett a girly investor is not a put-down..
Turns out “investing like a girl” is a good thing. It refers to Buffett’s even temperament — calm, disciplined, patient, realistic. The result: long-term investing success.
The conceit of this book is charming and a clever way to lure readers into learning the ABC’s of investing courtesy of The Motley Fool‘s LouAnn Lofton. The author has been with David and Tom Gardner’s financial education crew for more than a decade and was the managing editor of Fool.com.
Here are the eight traits gleaned from scientific research studies about female vs. male investors that Buffett epitomizes, according to Lofton’s reporting.
Female investors tend to:
• Trade less than men do. One study found that men trade 45% more often than women do.
• Exhibit less self-confidence: men think they know more than they do, while women are more likely to know what they don’t know.
• Shun risk more than male investors do.
• Be less optimistic, and therefore, more realistic, than their male counterparts.
• Put in more time and effort researching possible investments, considering every angle and detail, as well as considering alternative points of view.
• Be more immune to peer pressure and tend to make decisions the same way regardless of who’s watching.
• Learn from their mistakes.
• Have less testosterone than men do, making them less willing to take extreme risks, which, in turn, could lead to less extreme market cycles.
Lofton ticks off these feminine investment characteristics, dedicating a chapter to each one, and uses Buffett and his publicly traded holding company, Berkshire Hathaway, as the billboard for this winning approach.
For example, in the chapter: “Trade Less, Make More,” she writes: “Buffett really is the king of the trade less, buy and hold school of thought. Holding on to companies you invest in is important to Buffett because he likes to emphasize that when you buy a stock, you aren’t just buying a three-or-four-letter ticker, dancing across the screen like a mythical secret code. You’re buying a living, breathing company. Understanding this — that you are buying into an actual business — is an investing truth … you’re becoming a business owner,” she writes.
To bolster the female mystique, throughout the text, Lofton scatters investment pearls pulled from interviews with a handful of successful women investors. These include: Lisa Rapuano, founder of Lane Five Capital Management; Lauren Templeton, founder of Lauren Templeton Capital Management; and Candace King Weir and Amelia Weir of Paradigm Capital Management.
Ultimately, this book is a Motley Fool mantra, and shifts from Lofton’s “I” into the “we” voice, so don’t be confused.
• We believe you should stick some money in an index fund, in addition to investing in individual stocks.
• We’re all for long-term buy-to-hold, but … sometimes you just have to sell a stock you’ve bought. That’s OK, so long as you are doing it for the right reasons.
• On the issue of diversification, we differ from Buffett. While Buffett has long believed that you need to own just a few stocks, and own a whole lot of each of them, we believe in spreading this out a bit more.
Lofton (and the Fools) do an admirable job of parsing out the tried and true tenets of smart, sound investing and hitting on how you can improve your investment returns.
The approach is refreshing. If circling the wagon around Buffett as to why this feminine investment method works makes it more palatable to apprehensive investors — male or female — more power to them.
The book is a tad repetitive, but the message is a winner. You have to start investing to take control of your financial future, and before you can be taught how to pick stocks, you must learn how to master your temperament. No lipstick necessary.
Contributing: Hannon is a freelance writer based in Washington, D.C. Her website is www.kerryhannon.com