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Women and men do differ when it comes to investing.
However, while many may think of women as the weaker sex when it comes to investing, female investors actually capture stronger rates of return than their male counterparts.
Women outperform men by 40 basis points, or 0.4%, on average, according to Fidelity’s 2021 Women and Investing Study. This positive margin can translate into tens of thousands of dollars over time.
In addition, women have been making significant gains in accumulating assets, with 67% of female investors surveyed saving beyond their retirement accounts, up from 44% in 2018. Meanwhile, nearly 50% have saved $20,000 or more outside their retirement accounts and emergency funds, with 20% saving $100,000 or more. This extra savings can mean considerable assets over the long-term.
If female investors have any weakness, it’s their mistaken belief that they are not good investors. The Fidelity study reports that only one-third of women surveyed see themselves as investors, meaning only 33% feel confident in their ability to make investment decisions.
Over the years, I as a financial advisor have observed the unique strengths of the female investor. Working with countless female clients, my team and I have discovered that as a group, these women share certain characteristics that make them both savvy savers and intuitive investors.
At the risk of sounding like we are stereotyping — we know that everyone is different — we believe that everyone should put a high value on these traits when making investment decisions:
- Thoughtfulness and discipline. While we have found that male clients tend to eagerly invest in the latest asset class everyone is talking about, like cryptocurrency, female clients do not generally jump on the shiny bandwagon. They tend to take their time to explore investment opportunities and stay in their investments longer. This mindset follows one of our firm’s guiding wealth management principles: Sooner or later, the consensus is always wrong.
- Curiosity and interest. In our experience, women are more engaged in learning about the “how’s” and “why’s” of investing. They want to understand the planning, investment selection and management processes to make informed, confident and stress-free decisions. We encourage them to own their financial planning and investing processes by taking a deep dive into how they want their money to work for them and align with their goals — including their values — as well as how they want investment decisions made and what information they want to share (or not) with their partners.
- Trust in people and process. We have had the opportunity to invest the assets of heterosexual couples separately in situations where each partner was independently wealthy before their relationship. What we have found is that more often than not, the female partner achieves higher investment returns than her male counterpart. We attribute this incongruity in earnings to the female investor not overthinking her strategy, and her inclination to accept and follow advice once she has established trust in her advisor.
- Openness to advice and collaboration. Women value the power of partnership, and we encourage female prospects to interview us at the start of our relationship to make sure they are building a team they can connect with. Are they comfortable talking through their decisions with us, as well as having us work with their accountants, attorneys and other advisors? We suggest that an advisory team include women, as well as men, of different backgrounds who can benefit from one another’s varying experiences, expertise and investment approaches.
Through studies and real-life experience, we can categorically debunk the old wives’ tale that men are better investors than women. In fact, we can point to specific situations and traits that show that female investors are the stronger sex in the investing arena.
So next time you’re making an investment decision, consider investing like a woman. It will likely pay off.
— By Meghan Railey, co-founder and CFO of Optas Capital