The writer is a manager of bond portfolios at Barksdale Investment Management and co-author of ‘Undiversified: The Big Gender Short in Investment Management’
“What is a day trader?” My son calls me to apply right after his 18th birthday, again in possession of a Schwab brokerage account full of high school graduation cash.
When I define the term, I confess that, yes, he became a day trader with a paper profit of $ 1,000 in his first week as a legal adult. I say “confess” because he did what I advised him not to do: turn to Reddit forums and play on the actions that dominate him as a reseller GameStop.
My son will not go to the poor house if he gambles badly. I doubt most day traders are. And I’m sure he learns a lot from his experience.
But as someone who earns a living out of investment management, I worry about the wider impact of the hype surrounding day trading on so-called stock memes.
It perpetuates a number of myths about “real work” that are very different from investment management which, in turn, perpetuates the lack of gender diversity in the industry. The breathless coverage of meme stock signals that investment is the domain of high testosterone, which takes risks, looking for “bros” who scream in online forums and go to war with wealthy hedge fund managers. He suggests that successful investors rely primarily on instinct, not analysis.
The reality, of course, is very different. As a portfolio manager, I can personally attest to the fact that most of us, male and female, are generally analytical, stodgy, nerdy who wouldn’t think of buying a stock or a bond without having thoroughly studied the company. It would be reckless otherwise, not to mention a breach of fiduciary duty towards customers.
Bets focused on very few stocks by meme stock traders challenge the diversification principle of Investing 101. The day trading approach requires an appetite for tremendous risk and acceptance of daily fluctuations, unpredictable in your savings. of life.
Research shows that women typically take a different approach to risk from that. That doesn’t mean they’re unable to take it – just that they tend to have a more balanced view of reward risk.
I worry that a young woman reading the cover of the meme action might conclude either that she is no match for hyped traders and / or that she has no interest in working in an industry dominated by this type of personality.
Women are already discouraged from entering into large-scale fund management. The gender imbalance in the industry is severe.
To name a few numbers, only 10 percent of U.S. portfolio managers (people who invest your money if you have a mutual fund or ETF) are women, according to Morningstar research report. And only 16 percent of financial advisors (people who recommend mutual funds and ETFs for you) are women.
Investment management interviews often take advantage of current investment experience, which is a disturbing way to examine candidates. In addition to the basic evidence of necessary investable wealth, which eliminates people who grew up in modest homes, how do you verify this prerequisite?
Let’s say a woman enrolls in an MBA program, the traditional pipeline in the investment manager’s career path. Their interest in an investment job may be aroused. However, she might be derailed by a recruitment process that almost always asks candidates for their investment experience. He could be interviewed alongside the serious young man who tells the story of his “ten bagger” – an investment that grows 10 times in value – on a stock loved by the meme crowd as the movie chain AMC Entertainment.
And then the hype about what it takes to be a day trader grows again. A well known one Harvard Business Review Study suggests that women only apply for a job if they have 100 percent of the qualifications, as opposed to men who apply with 60 percent. Which may suggest that a job for which a “murderous instinct” is advertised as a qualification will necessarily attract fewer women.
Much more attention should be paid to the tremendous gender and racial inequities in the ranks of portfolio managers and investment analysts than to putting out yet another piece of stock meme. Taken as a whole, this meme coverage probably contributes to these inequities by discouraging women and people of color from entering the investment industry.
My last call from my son was another update on his paper profits (up more than 45 percent or $ 4,500 now). He was with one of his schoolmates who is also a self-taught day trader. On a whim, I asked them if they knew any female day traders. They replied, “Um, no.”
Unhedged – Markets, finance is strong opinion
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