When it comes to women and investing, there are quite a few myths and stereotypes that have been perpetuated through the years. Here we look at what the data really say about female investors.
Women have longer life expectancies, must contend with the gender income gap, and are often in and out of the workforce due to family circumstances. This means that their financial needs can be very different.
And yet there are a number of stereotypes that surround females when it comes to the subject of investing. What we’ve found is that many old beliefs about how women approach investing are just plain untrue. At the same time, many women report that they see room for improvement in their own investing knowledge and savvy.
With that, we look at a few commonly-stated notions about women and investing, and offer a few tips for female investors based on the data.
True or False: Women are risk averse
False.
Research has shown that, yes, women take on less risk than men do when investing, but that’s often because they are in general more level-headed and tend to stay the course regardless of market conditions.
Rather than being risk averse, women are instead risk aware — a positive distinction. This means that women tend to be more meticulous and even calculating in making investment decisions. They have also been shown to be better at matching their expectations with reality — which can make them appear less willing to take risks, but this isn’t actually the case.
True or False: Women aren’t interested in investing
False.
What is true is that the financial industry has a history of targeting males, which can put up barriers to entry and education for women who are, in fact, interested in learning and investing.
The notion that women don’t want to deal with money (or that they are only interested in spending it) is outmoded: 88% of women would like more financial education, and women of all generations said they would like to learn more about how to invest money.
True or False: Having confidence to invest increases with age
True
Although the Financial Industry Regulatory Corporation (FINRA) found that just 34% of women reported feeling comfortable making investment decisions (compared with 49% of men), it seems investing savvy increases with age: 46% of millennial women say they are well equipped to invest, 52% of Gen X women say the same, 54% of baby boomer females, and 60% of the silent generation.
True or False: Women investors consistently outperform their male counterparts
True
This study found that women outperform men in generating higher returns on their investments, and that they actually save a higher percentage of their annual income. A number of other studies have found that women on average earn better returns. For example, in 2015 (not a great year for the stock market), women lost an average of 2.5% while men lost an average of 3.8%.
Ensure your success as a female investor
Invest with patience: Staying the course and keeping an eye on long-term financial goals (despite market fluctuations) is a strength many women have when it comes to investing. Especially when it comes to the stock market, a strategy that includes patience is one that will serve any investor well in the long run.
If you are inexperienced as an investor, start by establishing investing parameters that will help you pursue investing deliberately, rather than in response to market fluctuations.
Develop a healthy relationship with risk: When it comes to your ability to take risk, realize that it shouldn’t stay the same throughout your life. For any investor, risk tolerance changes over time; you want to ensure the risk in your portfolio helps you achieve your goals of investing in a manner that ensures adequate retirement income and outpaces inflation.
One finding is that women save more, but could better grow assets over time and preserve purchasing power by investing in equities. That’s because investing has historically generated higher returns than socking money in a savings account. If you’re one of the less-than-5% of women who take a good deal of risk in their portfolios, reach out to a wealth advisor to find out if you could benefit from taking on more risk.
Grow your confidence: While investing confidence increases with age, there’s still a significant percentage of female investors who have some doubts about their ability to successfully invest or make the most of their money (regardless of personal or professional achievements or financial situation).
Confidence is a muscle that gets developed as you exercise it, and if you’re inexperienced as an investor, sometimes it can help to have a “trainer” in the form of a trusted financial professional or wealth advisor. There’s a strong link between confidence and knowledge, so arm yourself with the knowledge you need to increase your confidence.
