Now is the time to shine a spotlight on a topic that, despite progress, still shows significant gaps: the gender gap in investing. For too long, that narrative has been distorted to give the impression that investing is a man’s game.
In fact, did you know that according to research from UBS Global Wealth Management, a whopping 58% of women leave major financial decisions to their male partners? Yes, you read that right. And it gets even more interesting.
For younger people aged 20 to 34, this number is slightly lower, but still significant at 56%. Meanwhile, women over 50 aren’t far behind, with 54% letting their spouse take financial reins.
But here’s the kicker. Life is full of curveballs, and at some point, many women will be left on their own to manage the household finances. Whether we’re single, divorced, or widowed (the average age is 59, according to the Census Bureau), many of us will likely need to manage our money alone for decades.
But when women take the reins of investment decisions, things not only change, they thrive. So why is this important? Well, because when a woman steps into investing, she tends to get discouraged.
Female investors consistently earn higher returns than men
It’s interesting that study after study shows that women outperform men when it comes to investment returns. So how much better have they gotten?
Let’s break it down with data from The Motley Fool about women and investing. Fidelity analyzed nearly 5 million customer accounts over a 10-year period and found that women lead by 0.4%. It may sound like a small thing, but in the world of investing, this is a big deal. And this study conducted at the University of California, Berkeley in the ’90s showed that women lead men in investment performance by nearly 1 percentage point.
As an added bonus, a Wells Fargo study covering the 10 years ending in 2022 showed that not only are women outperforming men in the return game, but they are also winning by reducing risk.
Why are women better at investing?
Have you ever wondered why women have higher investment returns than men? There’s no one-size-fits-all answer, but a variety of characteristics can tip the scales in women’s favor.
Women are more conservative investors
Overall, women take a more conservative or moderate approach to investing compared to men, who tend to take a more aggressive stance. And while men may chase the latest hot topics like everyone’s new favorite, cryptocurrencies, women don’t jump on the bandwagon as quickly and tend to have more stable brokerage accounts.
Female investors are less impulsive
Embracing a long-term perspective and resisting impulsive decisions are the hallmarks of a successful investment strategy. Women seem to have an advantage here. They are more likely to remain calm during market turmoil. Fidelity noted that 51% of women are more likely than 43% of men to want to wait out market turbulence. Men are also more likely than women to increase or decrease their investments during this period. Market timing is notoriously difficult, so sticking to a consistent investment plan is often advised. Set aside a certain amount of cash in your budget to contribute to your investment account.
Additionally, Vanguard observed that women check their accounts much less frequently than men and transact 44% less frequently. Research from the University of California, Berkeley supports this, showing that women trade 45% less frequently than men. This difference in trading frequency emphasizes that the approach is less impulsive, leading to higher annual earnings for women.
How to start investing
Recognizing obstacles such as trust gaps, limited financial literacy, and persistent stereotypes is the first step to breaking them down. Here are some tips for women looking to overcome these challenges.
- Breakdown of financial goals: Start by setting clear and achievable financial goals. Whether it’s saving for retirement, making a down payment on a home, or building an emergency fund, knowing what you’re working towards can help you stay focused and motivated.
- Embrace financial education: Dedicate yourself to learning about investing. From online courses to financial podcasts, resources abound. The more you know, the more informed decisions you can make.
- Start investing now: Don’t wait for the “perfect time” or wait until you have “enough money” to invest. Even small, consistent investments can grow significantly over time thanks to compound interest.
- find a financial friend: Partner up with friends who share your financial goals. This partnership can provide mutual support, accountability, and encourage you to take bold steps in your financial endeavors.
- Please consult your financial advisor. Our experts will provide you with personalized advice tailored to your financial situation and goals. Don’t be afraid to ask for help when making important financial decisions.
By tackling the gender investment gap head on and giving women the tools, knowledge and confidence to invest, we can change the financial landscape for equality and success for all. Remember, the journey to becoming a wise investor starts with just one step. Let’s count those steps.
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