Title: "Warren Buffett Invests Like a Girl: And Why You Should, Too — 8 Essential Principles Every Investor Needs to Create a Profitable Portfolio"
Author: Louann Lofton
Publisher: HarperBusiness, 2011, 272 pages; $15.43 on Amazon.com
Articles, books and whole industries have arisen to address the issue of women’s self-confidence (and the lack thereof) and boosting it. In her new book, Louann Lofton, the managing editor for online content for investment resource The Motley Fool, pleads a persuasive case that there’s an upside to this dearth of self-confidence: it makes for a smart and steady investment approach.
Men, Lofton repeatedly points out, have been shown time and time again to be overconfident in their investment decision-making, which is just one of many so-called "male" temperamental characteristics that make a masculine investment approach riskier, less profitable over time and generally inferior to a feminine one.
In fact, the titular thesis of Lofton’s book is that the "Oracle of Omaha’s" approach, and the elements about it we should all emulate, is characterized by a number of temperamental characteristics that are, Lofton says, feminine in nature.
And thus starts "Warren Buffett Invests Like a Girl: And Why You Should, Too — 8 Essential Principles Every Investor Needs to Create a Profitable Portfolio." With the caveat that the book is based on and full of gender stereotypes (if you can make a conscious decision from the start to suspend your political correctness, overlooking the obvious fact that not every man is overconfident and risk-loving, nor every woman underconfident and risk averse), I suspect you might find in this book a novel angle to understanding and organizing the attitudes and viewpoints that can create a successful, long-term personal investment approach.
This book is not at all about how to read charts or understand data; rather, it emphasizes what Lofton calls "temperament": "the manner of thinking, behaving or reacting characteristic of a particular person."
First, Lofton explores the scientific data — the various findings of various behavioral economic studies that have analyzed the investment style differences between men and women — and distills eight findings about women’s investment tendencies, ranging from trading less than men, and being less overconfident and overoptimistic than their male counterparts, while being more risk-averse and more willing to spend time and effort researching their investments before they make a move.
Then, Lofton provides a brief backgrounder on Buffett, who she deems "the greatest investor of all time," before launching into the bulk of the book, which offers up evidence supporting Lofton’s argument that Buffett’s own style mirrors the best and brightest spots of a feminine investment style, as defined by the data findings.
Lofton closes the book with a discussion of "Foolish Investing Principles 101," the key philosophies that make up the approach advocated and followed by The Motley Fool and its own funds, which are (a) more specific than, but (b) all fall within the taxonomy of Buffett’s feminine style, as sketched out by Lofton.
For example, women (and Buffett) are "less optimistic, and therefore more realistic, than their male counterparts," according to Lofton; while foolish principles admonishing advisers to avoid being excited by market swings or drops, avoid being bossed around by the market, and to view "pessimism (as) your friend, euphoria the enemy" (Buffett’s words) all fall under the umbrella of this female investment style trait.
In the appendices and throughout, for that matter, Lofton does provide interviews of top female money managers, which some women investors might find inspirational. Also, the book is written in exactly the straightforward, intelligible verbiage that is so absent from many investment books and materials, partially explaining why many women are turned off from investing and investment books and resources, which in turn might explain the lack of self-confidence.
But, to be clear, this is not an investment book for women, nor does it address or offer advice specifically tailored for overcoming the critical gender differences in terms of how seriously women underinvest and undersave, as data has shown time and time again. As these would seem to also arise from something peculiar to the way women think about investing in the context of their lives, it was a slightly glaring omission.
Or maybe not. Though this book is not set up to solve these issues, it certainly could help do so, if women are interested enough to grab it off the shelves. In particular, the "Foolish Principles," as Lofton articulates them, are very basic, very uncomplicated, very sound principles that could put a hesitant investor, male or female, on the right foot from the start.
In the final analysis, though, this is a book with the potential to teach something to men about how to optimize their style, and the potential to teach women about the value of their inherent style that might help some overcome their reluctance.