My Money’s on the Women
The recent Time’s Up and #MeToo movements have given me reason to reflect on the role of gender in the financial industry. When it comes to investing, common stereotypes plague women. For example, we’re too conservative or don’t understand enough about investments. We don’t save enough. We start too late. We lack confidence. I often (though not universally) see this in my own interactions with clients, especially married couples. Wives tend to defer to their husbands when it comes to making investment decisions and trust in the husband’s experience and decision-making. This is not a judgment, just an observation.
Well, much like in other areas of our culture, the tides are turning, and are doing so in favour of women. Recent research indicates that women are outpacing men in terms of annual investment returns and the amount of annual savings12. However, we suffer from a crisis of confidence, or lack thereof. In a 2016 Women and Money Survey from Fidelity Investments, when asked about which gender group was likely to have a better return, over 90% of the women thought the men would do better even though the former were the better-performing group.
Many women crave more financial education to help them increase both investment knowledge and confidence in their decision-making abilities. It is prudent to take this approach. According to the Fidelity research, roughly 90% of women will be solely responsible for their finances at some point in their lives, due to death, divorce or some other circumstances. Women cannot afford to be passive bystanders because the cost of being uninformed could be catastrophic.
Fortunately, from a behavioral finance perspective, women have some attractive investment traits that serve them well. Kiplinger’s compiled a list of some of these positive attributes (read the full article); here is brief summary:
- Familiarity: as the primary purchasers in the household, women tend to invest in companies they are familiar with. Being an informed buyer can also lead to uncovering investment opportunities.
- Temperament: While men tend to take more aggressive positions in their portfolios, women are generally more content with steady, predictable returns.
- Being goal-oriented: Women are less likely to be swayed by water cooler banter about hot stocks. As a result, they stick to their strategy and do not trade in and out of securities as frequently as men.
- Being a team player: Women are more likely than men to seek professional guidance in managing their portfolios, and this approach yields better investment results than those who prefer to go it alone.
The take-away? It is long overdue for women to understand the value they add to their own bottom line. For the women readers, find an advisor who will help educate you throughout your investment journey, and most importantly, trust in your instincts and abilities.
1 Shell, Adam. “Women Are Better at Investing than Men, Study Says.” USA Today, Gannett Satellite Information Network, 19 May 2017, www.usatoday.com/story/money/markets/2017/05/19/women-and-investing-study/101798868/.
2 Kristof, Kathy. “The Secrets of Women Investors.” Www.kiplinger.com, Kiplingers Personal Finance, 4 Oct. 2017, www.kiplinger.com/article/investing/T031-C000-S002-the-secrets-of-women-investors.html.