Want to make a bundle investing in stocks? The trick is to ignore the frantic trading, excessive leverage, inflated egos and impatience that are rampant on Wall Street and Bay Street, says author LouAnn Lofton.
Instead, she suggests budding investors learn from the legendary Warren Buffett, who credits his success to a calm, disciplined temperament and the ability to think long-term - qualities that studies show are typically shared by many women.
"Women do really have the temperament to succeed as investors," Ms. Lofton said in an interview.
Studies by the University of California, the University of Cambridge, and the University of Tennessee, among others, have shown that female investors are more apt to be patient, realistic and prudent, while men tend to be more emotional, impulsive, and overconfident. Women appear to take more time to research their choices and take fewer risks.
In her book, Warren Buffett Invests Like a Girl And Why You Should Too, Ms. Lofton cites one study that says men trade stocks in their accounts 45 per cent more often than women, which translates into higher transaction costs and capital-gains taxes.
Ms. Lofton's own journey with investing began when she was a teenager. The unexpected death of her father meant she would inherit a chunk of money at 21. She read everything she could on investing, but it was Mr. Buffett's approach that impressed her the most.
"He did all these things that made sense to me: buy companies you understand and have a long-term approach. This is something I felt like I could do," she said.
Ms. Lofton, now 36, bought her first stock in 1998. She paid about $22 (U.S.) a share for Nike Inc., a stock that is now trading around $90.
She says that women need to work harder to secure their financial future because they tend to die older and often don't earn as much as men. "We are faced with having to make do with less for longer," Ms. Lofton said. "So we, as women, have a bigger financial hole to dig ourselves out of."
She provides these five tips:
1. Stop listening to the men in your life when they claim to know more about the stock market and finances than you do. (Unless, of course, one of the men in your life happens to be Warren Buffett.)
2. Learn about your natural advantages as an investor and embrace them. A more patient, longer-term, and less risky approach will lead to a bigger portfolio and nest egg down the road.
3. Pick one public company you admire and read everything you can about it. We all shop for food and clothes, and some of the companies that produce them have made for amazing investments over long holding periods.
4. Pay attention to the company's brand and whether it has a true, sustainable competitive advantage. Check out its balance sheet and cash flow statement: you're looking for a cash-rich, low-debt company with the ability to continue generating more than what it's spending on operations. Make sure you understand the way it does business. Then, learn about the management team.
5. With an emergency fund intact and credit card debt in check, open a discount brokerage account. It's easy and quick to do online, and most account minimums are not prohibitive. Take a look at a comparison guides, such as Globe Investor's online brokerage survey: tgam.ca/onlinebrokers-2010
6. Toe-dip your way into the stock market by buying a few shares - or even just one share - of the company you have learned all about. Keep following it (but ignore meaningless day-to-day movements in stock price), knowing that you're an actual owner.
Ms. Lofton will answer your questions on Thursday, July 7th in a live online discussion. Join us on the Globe Investor Personal Finance site to participate.
Roma Luciw