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Why teachers are better investors than pretty much anyone else

Elementary School Teacher

Day traders, consider yourself officially schooled. 

In an analysis of 20,000 investors to be released on Tuesday, Openfolio, an online platform where investors privately and publicly share their investment holdings, schoolteachers averaged better returns than people from any other profession.

Over a 12-month period ending in February 2015, teachers saw a 10.2% return on their investment holdings, compared to an average investor return of 7.6%. Teachers beat technology professionals (8.3%), people in the finance industry (6.9%) and basically obliterated government workers, who earned just 3.4% on their investments.


So, what makes teachers so savvy about investing?

Analysts from Openfolio found a couple of common themes among teacher investors:

Teachers are far more patient than other investors. They only traded 6.1 times per year, compared to the average investor, who traded  9.1 times. This should come as no surprise. Plenty of research has shown that passive investing trumps active investing on a pretty consistent basis. 

Teachers aren’t sold on individual stocks. Openfolio found that teachers are much more likely than the average investor to invest in mutual funds than in single stocks — a more diversified approach. About 52% of teachers invested in mutual funds, holding the rest of their investments in individual stocks. The average investor held 46% in mutual funds and 54% in individual stocks.  While Openfolio does not reveal the exact brokers its investors use (for security purposes), they estimate that teachers invest 10-20% more through 401(k)s than through self-directed accounts (like a brokerage account with E*Trade) when compared to the average investor.

Reading between the lines, we could also easily argue that teachers make for better investors because, well, the majority of teachers are women. More than three-quarters of American teachers are female and in the past, womens' tendency to trade less often than men has proven beneficial to them in the long-run, according to several studies.

Bottom line: Teachers are following investment strategies that have been proven to work time and again. Maybe investing by the book isn’t such a bad idea, after all.

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