Kathy McCauley is a real estate agent for @Properties in Chicago. Years ago, she became interested in the stock market because she noticed so many young, affluent male traders were in the market for expensive real estate. And she wanted to learn more about how these young men made their millions. She was tired of feeling powerless as she watched her 401(k) slowly inch along and her savings account stagnate. So, with the words of her father echoing in her head, “If you do nothing, you will have nothing,” she took control of her financial future.
The first investment McCauley ever made was in a company called General Growth Properties (GGP). She chose this stock because everyone she talked to told her to invest in what she knew. And if there’s one thing she knows a lot about, it’s real estate. At the time, GGP was going through some struggles, but she felt strongly the company would get through them. That first investment netted a $2,500 profit and gave her the confidence to carry on. “I’ve got this,” she thought.
Her next investments? Apple (AAPL) at $219 per share and Google (GOOG) at $349 per share, both pre-split. She knew little about technical or fundamental analysis. She just knew that she liked their products. In her first year, her account was up 30%. What do I say to that? “You go, girl.”
At TD Ameritrade, we have a client base of over 6.3 million accounts. But only 32% of our account holders are women. I thought it would be interesting to take a closer look at the broad base (pun intended) of female investors at TD Ameritrade to see if there is anything different about how and what they trade as compared to their male counterparts.
Women trade what they know
The number one stock that women are more likely to hold than men is Tiffany (TIF). In fact, they’re 1.7 times more likely to hold Tiffany than their male counterparts. It makes sense. We all love to see a little blue box under the Christmas tree. We love the jewelry, the crystal, and especially the store on Fifth Avenue.
The other stock they are more likely to hold? Chico’s (CHS). They are 1.5 times more likely to buy Chico’s than our male clients. And I get that. Chico’s is a brand that targets women 40 years and older. According to their 2013 corporate report, they emphasize “a comfortable, relaxed fit in a modern style.” Probably not as big of a draw for male investors as … I don’t know, say … L Brands (LB)/Victoria’s Secret.
From a sector perspective, our She-traders zero in on consumer discretionaries. Which they should. It’s been stated that women tend to make at least 80% of all consumer purchases. They’re experts at looking at the budget and figuring out ways to make their dollar stretch further, while still looking for the best product.
And what two stocks are men more likely to hold than our She-traders? Radio Shack (RSH) and The Tile Shop (TTS). Actually 1.9 times more likely. And we’re good with that.
Women commit more fully
Shocking, right? Not really. When women find a company they like, they’re more inclined to allocate more of their portfolio to that company. Naysayers will chime in on this point because of the rules of modern portfolio theory and asset allocation. But who among us hasn’t broken those rules when you truly, madly, deeply love a company? I know I have. Tiffany and Nordstrom (JWN) are both good examples of this. Our female clients who invest in either of these companies tend to average a 6% allocation. And they have reaped the rewards, as over this past year both have outperformed the S&P 500 (SPX).
Women trade less often
Finally, according to our database of over 6.3 million accounts, men place two times as many trades as our female clients, on average. According to McCauley, her trading New Year’s resolution is to trade more like a man. What does she mean by that?
“I think my trading style is like my dating style. I can be relationship-oriented and become emotionally attached to my stocks. Too often I will stay in the “relationship” (stock) long after it is over. I’m usually all, ‘hey stock, I know you broke support, but it wasn’t your fault; the entire market was down … we can get through this … there is no reason we have to break up.’ When I should be like, ‘hey stock, we had a great run, we can still be friends, no one here has to get hurt, the truth is there are a lot of other stocks with much sexier charts and I gotta cut my losses. And who knows? Maybe we’ll meet up again?’”
Cheers to you, Kathy McCauley! May you achieve all your goals in the New Year.
Happy holidays and happy trading,