2019 was a banner year for stock pickers as there were plenty of hot stocks that propelled the market higher. Some of the big headliners were Apple (AAPL), JP Morgan (JPM), Okta (OKTA), Microsoft (MSFT), and Advanced Micro Devices (AMD). One of the benefits of our strategy, is we get exposure to all of these stocks by owning ETFs. However, if you’re looking for the next hot stock, you might want to ask your wife.
Listen to your wife
In the last 10 years, much research has been done on the topic of behavioral finance. This looks at the influence of psychology on investment behavior. One of the interesting findings is that women make better investors than men. Reasons vary, but a common one is that women are much better at buying and holding. Men, on the other hand, are much more likely to engage in active trading activity.
The idea of buying and holding tends to lead women to more conservative investments, such as index funds. Whereas men, driven by the idea of being able to get in or out of any investment they please, are more interested in extremely speculative investments. The results are predictable and in line with other studies that consistently show a buy and hold strategy usually beats an active one.
Hot stocks are hard to find
Finding the next hot stock is hard to do. But one of the lessons from women is that when they do find it they do a much better job of holding on. Even if it’s just investing in an index fund, women are more likely to stay the course during a downturn than men. Staying invested has major benefits, as we saw just in the last 12 months. The S&P 500 endured a 10% drop in December 2018, only to follow that with a 40% rally! So if you’re looking for the next hot stock, you might want to ask your wife for some tips!