Ladies — is investing gambling?

In one of the Singapore local banks’ reports in 2020, it was reported that women generally see investing as gambling.

For a long time, despite my formal finance training, I used to fall under this category. Back in 2011, when my male ex-colleagues were taking advantage of the dip in the US stock market to increase their investment, I largely stayed away, with the precipitous fall of the stock market in the 2009 Global Financial Crisis still fresh on my mind. Even though I knew that the stock market had staged a strong recovery in 2010, the fear of a repeat of 2009 was a major deterrent. My belief then was that the stock market was a dangerous place that should be avoided and shunned, and all who invested were in essence reckless gamblers.

Psychologists have a name for this — negativity bias — which is our tendency to register negative stimuli more readily than a positive one, and female seems to have a stronger negative bias as compared to men. This may be the reason why potential losses of a stock market crash feature more prominently among women than men at a subconscious level.

It does not mean, however, that having a negativity bias is bad. In fact, from an evolutionary perspective, it was a very useful survival tool. It is our brain’s way of keeping us safe, making us more attuned to dangers around us. When viewed from this perspective, it was perfectly logical for women to hold a negative view of investment in the stock market. It is their means of protecting their hard-earned dollars from falling into a lion’s den.

The question is — is investing in a stock market the same as falling into a lion’s den? At first glance, it would appear there are similarities. Look at the performance of some speculative stocks that have lost 80% of their value from a year ago and one can understand why. However, not all stocks fall into the same category. The S&P index has an annualized rate of return of 10.5% from 1957 till 2021. Therefore, the key to protecting from dangers may not be avoiding investing entirely, but to equip ourselves with knowledge and education.

The same survey found that once women with confidence and knowledge invest, their investments tend to do better than men. So ladies, don’t wait — start educating ourselves today!

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