How has Warren Buffett become the third richest person in the world with a net worth of $50 billion? It may be because he invests like a girl. Financial editor and writer LouAnn Lofton, author of recently releasedWarren Buffett Invests Like A Girl, studied the habits of the world’s most renowned investor and compared them to the latest research about men, women and money. The conclusion: The Oracle of Omaha has a decidedly feminine investing style.

Like Buffett, women are more likely to have a calm temperament, a longer-term outlook, do more research, trade less and remain steady under pressure, says Lofton. And what does Buffett think about the claim? “I plead guilty,” he said.

I caught up with Lofton to learn more about her theory and uncover the secrets of the investing legend.

Forbes: So Warren Buffett invests like a girl? What does that mean?

Lofton: It’s all about controlling your emotions. It’s all about temperament. Buffett has always said that it’s temperament–not intellect–that makes you a great long-term investor. When you look at studies that have been coming out in the last 10 years about how men and women invest, what you see is that women tend to naturally have this temperament that creates long-term investing success.

What does he think of the title?

I sent him a copy once I was done. I have been reading about Buffett for a very long time. I inherited money when I was 15 that I would be able to access at 21. So a year out of high school I started trying to learn about investing and stumbled across a book about Warren Buffett. I was immediately inspired and have followed him ever since. I thought: He has a great sense of humor, and I suspect he will know immediately that this is a compliment. When I was out in Omaha for the annual meeting, I asked him if he thought he invested like a girl. He said he pled guilty. He was very gracious.

When it comes to investing, what does he do right?

He takes investing seriously. He does not view it as a gamble. He thinks long-term, and only invests in things he knows and understands. He says his favorite holding period is forever. It’s the exact opposite of what we’ve come to expect from Wall Street—frantic trading, ego, excessive risk-taking. Buffett sits out in Omaha and quietly, calmly, patiently invests and builds wealth.

How do men and women invest differently?

Men tend to be more overconfident than women. They think they know more than they do. It can lead them to trade too much, take too much risk and invest in companies they don’t understand. Women will say they don’t know as much. They’re not as confident and tend to be more risk-averse. It sounds like a bad thing, but it can work in your favor. You’re going to do more research and take it more seriously.

Women are often stereotyped as being overly emotional, but in your book you applaud them for being even-keeled.

Yes, I would argue that men are more emotional when it comes to investing. They trade too much and view investing as a game. They are driven by ego and overconfidence and testosterone. They’re more likely to trade on hot stock tips and not do enough research. There’s a study from Vanguard that looked at the fall of the market in 2008 and the movements in IRAs. It found that men were more likely to panic and sell at the bottom—at the exact wrong time. They were unable to control their emotions. Whereas women, who tend to be calmer, patient and with a longer-term outlook, did not. They held fast.

You also seem to think it’s a good thing that women are less confident than men, but does it ever work against them?

Women do need to educate themselves and learn more aboutinvesting. I’m not suggesting that they emulate male ego, though. Women don’t make as much money and live longer, so we are faced with this sadly unique situation of having to make do for longer with less money. I recently read in a U.S. economic report that by the time a woman turns 64, she will have missed out on $430,000, attributable to the pay gap alone. That’s astonishing. That’s the penalty you pay for being a woman. It is incumbent on all of us to take charge of our financial futures and to become prepared for retirement. Women are great investors but maybe just don’t know it yet.

What’s your advice to the women who feel intimidated by investing?

Investing can be intimidating. Do some research first. Then you have to make that next step and take action. That is where it’s scary. A lot of girls are told growing up ‘math is hard’ or ‘this isn’t for you.’ That stuff can get in your head. If it is scary to you, start small. Open a low-minimum brokerage account. You can do it online very quickly and easily. All these companies that we interact with on a day-to-day basis can make great long-term investments (but don’tjust invest in Starbucks because you like drinking the coffee). Buy just one share if that helps you get over the hump. Then read everything you can, which is one way to get over that intimidation factor. It is hard work, but it can be fun. It shouldn’t be something that’s disconnected from you.

What are the Buffett essentials that every investor needs to know?

Trade less. That goes back to long-term buying and holding, something that Buffett has always been known for. Secondly, try to reign in overconfidence, and don’t allow yourself to invest in companies you can’t explain. Buffett would never do that. Just look at the companies that have made him the investor that he is: railroads, Dairy Queen, The Washington Post, insurance, Fruit of the Loom underwear and Coca-Cola. These are companies that you can easily understand.

Research more. Buffett is renowned for his research. He reportedly reads five newspapers a day and countless annual reports. He often jokes that if you were to go to his office to observe him, you would be really bored. Evaluate management—that’s another thing that Buffett’s famous for. Focus on who’s running those companies. Also, try not to fall prey to peer pressure. Studies show that men in the company of other men tend to take more risks. It’s that competitive drive to try to outdo the other men in the room. Whereas women tend to make the same decision regardless of who is in the room.

With Buffett, he doesn’t care what Wall Street’s doing. He’s not going to be suckered into that. He buys what he knows, for the long-term, and manages risk as best he can. All of these things will help people make money—that’s what it’s all about.

http://www.forbes.com/sites/jennagoudreau/2011/06/27/warren-buffett-invests-like-a-girl/