While women have been traditionally late to the investment game, women’s wealth is growing. Women are rapidly changing and altering the investment landscape, and while they may still invest less than men, they are making serious headway. The good news is that more and more women are successfully investing their money.
A Fidelity study in 2021 found that 67 percent of women are now investing outside their retirement accounts, while in 2018, it was only 44%. That same study showed that women are also beginning to invest at younger ages.
Fidelity offered additional evidence that over a 10-year period, its female customers earned, on average, 0.4 percentage points more annually than their male counterparts. That may not seem like a lot, but over a few decades, it can add up to tens of thousands of dollars or more.
What’s driving some of these changes?
Lack of confidence is an often-cited reason behind women’s reluctance to invest. However, hesitation may hold you back from reaping the benefits of investing.
While it’s difficult to apply generic traits to millions of people, there are some shared characteristics that make women excellent at investing:
4 reasons why women are better investors than men
1| Women buy and sell less often
One source of women’s superior returns is their attitude towards trading. In studies of their customers, both Fidelity and Vanguard report that women buy and sell stocks approximately half as often as male investors. The relative overconfidence of men can lead to more frequent trades, which can end up hurting them in the long run. “Buy and hold” is a well-known and respected strategy for investors seeking healthy long-term returns. Numerous studies have also found that trading more frequently leads to lower returns.
2| Women are more likely to have a well-balanced portfolio
Women tend to be more risk averse. While this can hurt if you invest too little too late, a more cautious approach will usually lead to a more balanced portfolio. Rather than being too stock heavy, a woman’s portfolio is more likely to contain a healthy mix of cash, bonds, and stocks that balance return potential and risk.
3| Women ask for and listen to advice
Women investors are more inclined to collaborate, ask for advice, and follow recommendations given by financial advisors. Instead of relying exclusively on themselves, women are often more open to exploring opportunities and facts before moving, leading to more informed and financially sound decisions. According to Fidelity’s 2021 Women and Investing study, 86% of women agree that having their investments managed by professionals makes life less stressful. Furthermore, Spectrem Group found that 61% of women use a financial advisor, compared with only 56% of men. Spectrem also reported that men are more likely to feel that they can do a better job of investing than a professional.
4| Female investors stick to the plan
A woman’s plan when it comes to investing can be simple: become educated, create a plan, and stick to it. Nationwide Financial found that women are more likely to remain calm in response to market volatility. They found that 8% of female investors liquidated their retirement accounts during a market downturn, compared to 15% of men. Women are also less likely to jump onto new trends like crypto or other potentially volatile investments. As a result, they suffer fewer losses.ConclusionBy 2030, women in America are expected to control much of the $30 trillion in financial assets baby boomers possess today, according to McKinsey, a global management consulting firm, suggesting American women will inherit and ultimately be responsible for significant wealth.
There would be an extra $3.22 trillion of assets under management from private individuals if women invested at the same rate as men, a 2021 BNY Mellon study found.
Investing in success has a lot to do with your behavior. While you may be able to learn the basics of investing in five minutes, you need to keep your emotions in check for several decades or more to succeed.
This bodes well for all of us, men and women!
If you’d like to discuss investment opportunities and how Argent might be able to help you, please reach out to one of our wealth advisors at (800) 375-4646. We’re glad to assist however we can.