Learn to Invest Like Warren Buffett

Learn to Invest Like Warren Buffett

Would you like to make more money in the stock market? (We think we know your answer.) If you think that means you have to have an MBA or step way outside of your comfort zone, think again.

Author LouAnn Lofton says that qualities like patience, prudence and a realistic outlook—traits women tend to exhibit more frequently than men—have been shown to be some of the keys to success as an investor. In fact, in her book “Warren Buffett Invests Like a Girl: And Why You Should, Too,” she makes the case that one of the most successful investors of all time takes an approach to investing that we traditionally associate with women.

“Women tend to be patient and invest in companies they know and believe in, and when you look at Buffett, that is his way as well,” Lofton says. “He is buying stocks, but he views it as actual ownership of a company. He owns a lot of companies that we recognize, like Dairy Queen, and he only does business with people he likes and trusts.”

Studies show that female investors do more research, take few risks, trade less frequently and view investing as a means to an end, Lofton says. This approach gets results: Lofton cites a study that showed female hedge fund managers have outperformed their male counterparts by 55 percent over the last nine years.

Kristen Robinson, senior vice president of Women & Young Investors at Fidelity Investments, says women tend to be self-aware and are often “planners by nature.” As a result, she says women are more inclined to take a long-term approach to investing and to stay the course during turbulent times, such as the financial crisis of 2008.

“Men generally are competitive, and that is why focusing on investment returns is their natural inclination,” Robinson says. “Men like to win, not that women don’t, but it goes back to [men’s] competitive nature—they want to beat the market or maybe their friends.”

Amie Marks, an Oak Park-based financial advisor at Raymond James, says she attributes women’s success as investors to their communication style. She says women are often adept at listening and processing information. Women are also more likely than men to rely on professional financial advice.

“[Women] seek out the right people, and that often is why they are better investors because they are less controlling than men—and a lot of money is lost by wanting to be too in control.”

So how can you harness your natural inclinations as a woman to make money in the stock market?

Lofton says to make like Warren Buffett and invest in companies that you understand and that exhibit values that match your own.

“Women are making 75 to 80 percent of financial decisions in household, so every day you are interacting with outstanding public companies,” she says. “You know intuitively the companies that you enjoy and believe in that you go back to and your friends go back to. Invest in those.”