The hype of meme stocks can deter women from investing

The writer is a portfolio manager at Barksdale Investment Management and co-author of “Undiversified: The Big Gender Short in Investment Management.”

“What is an everyday trader?” My godson calls me to ask for it right after his 18th birthday, recently holding a Schwab brokerage account with cash for high school graduation.

When I define the term, he confesses to me that, yes, he has become a daily trader with a paper profit of $ 1,000 the first week of legal adulthood. I say “confess” because he did what I recommended he not do: reviewing Reddit forums and betting on stocks that dominate them, such as retail. GameStop.

My godson doesn’t go to the poor house if he bets badly. I doubt most day traders are. And I’m sure he learns a lot from his experience.

But, as someone who makes a living with investment management, I am concerned about the wider impact of the hype around daily trading on so-called meme values.

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. Breathless coverage of meme stocks indicates that investing is competition from “testosterone” with a lot of testosterone, who take risks and close the fence, who call 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, men and women, are largely analytical, resilient, and nerdy people who would not consider buying stocks or bonds without having thoroughly researched the company. Otherwise, it would be reckless, not to mention a breach of fiduciary duty to customers.

Betting focused on very few stocks of memes traders defies the diversifying principle of Investing 101. The daily trading approach requires a huge appetite for risk and acceptance of the daily and unpredictable fluctuations of your life savings.

Research shows that usually women they have a different approach to risk from now on. This does not mean that they are unable to take it, but that they tend to have a more balanced view of the reward for risk.

I’m concerned that a young woman reading meme stock coverage may conclude that she’s not compatible with advertisers and / or that she has no interest in working in an industry dominated by this type of personality.

Women are already deterred from entering fund management in large numbers. The gender imbalance in the industry is severe.

To name a few numbers, not more 10 percent of U.S. portfolio managers (the people who invest your money if you have a mutual fund or ETF) are women, according to Morningstar Research Report. And only 16% of financial advisors (the people who recommend mutual funds and ETFs to you) are women.

Investment management interviews often assess the actual investment experience, which is a worrying way to select candidates. In addition to the obvious reversible wealth base that is removed, which removes people who grew up in modest homes, how is this prerequisite verified?

Let’s say a woman enrolls in an MBA program, the traditional channel to the investment manager’s career. His interest in an investment job could be aroused. Still, it could be derailed by a hiring process that almost always asks candidates about their investment experience. He could be interviewed alongside the serious young man who tells the story of his “ten sacks,” an investment that increases tenfold in value, in a stock cherished by meme people like the AMC Entertainment movie chain.

And then the hype about what it takes to be a day trader reappears. An acquaintance Harvard Business Review Study suggests that women apply for a job if they have 100% of the qualifications, compared to men who apply for 60%. This may suggest that a job for which a “killer instinct” is intended as a qualification will necessarily attract fewer women.

Much more attention needs to be paid to the enormous racial and gender inequalities in the ranks of portfolio managers and investment analysts than the publication of the umpteenth meme. Overall, this meme coverage probably contributes to these inequalities by discouraging women and people of color from joining the investment industry.

My last call from my godson was another update on his paper benefits (45% more or $ 4,500 now). He was with one of his classmates who is also a self-proclaimed trader. On a whim, I asked them if they knew any female traders. They replied, “Um, no.”