Women & Investing: Myths v. Reality

As a woman fee-only financial planner, many of my clients are women. In fact, I pride myself on working with women who come from all walks of life and are each in a different place on their personal financial journey. It’s one of the primary reasons I entered this field of personal finance.

Over the years, I’ve heard many gendered financial stereotypes mislead women investors, and cause other financial planners to approach their clients’ saving and investing strategies differently as a result. Gendered financial ideas aren’t always based in reality - but there are some key things that women investors need to know about savings patterns and behavior biases.

Gender Difference Ideas in Finance Aren’t Always Based in Reality

There are many perceived gender differences out there about how men and women handle money differently, but many of them are myths. Let’s go over a few common gender-specific investing stereotypes that aren’t serving female investors.

Risk Aversion

It’s a common idea that female investors are more risk-averse than their male counterparts. In other words, women investors are less likely to take on risk in their portfolios. Recent research done by Barbara Stewart, CFA and other experts has shown that, although women generally have slightly less risk in their portfolios than men do, the data is too narrow to point to the idea that women are inherently afraid of risk - instead, risk is a highly individualized investing conversation that extends beyond gender. 

As an advisor, I’ve noticed that women often are more intentional in their investing strategy, and aren’t as interested in return-chasing in a way that doesn’t align with their long-term lifestyle goals. Female investors are patient - which means they’re focused on the long game when they invest!

Education

Many people (women included) believe that female investors have less financial education or background than men, which could mean that there’s a bigger learning curve when it comes to investing. The truth is that everyone needs more financial education. 

Women aren’t less educated about finance or investing than men -  but often, as a group, women allow this false idea to hold them back from investing or pursuing their financial goals.  Women may be more likely to rely on their financial advisor to keep them apprised of important financial information, once that trust relationship is built.

These are just two examples of gender-based investing myths that may be negatively impacting the mindset of female investors.

Where Women Succeed in Investing

Female investors are equally set up for success as male investors, but the story that the media and, at times, the finance industry itself, tells us doesn’t reflect that. There are some areas of investing where women have a clear advantage, although the media often makes it seem like women, as a group, are more risk-averse and may struggle to invest successfully or save for their own long-term lifestyle goals.  

Next time you’re second-guessing your investing decisions, remember these key ideas that highlight why women are incredibly successful investors:

Women Ask Questions

In my experience, female investors are incredibly willing to ask questions, do the research to understand their financial options, and are open to feedback. This can help to create a financial plan and investment strategy that serves you and your goals - and leaves room for growth, improvement, and change as you continue to learn and grow. 

Women are Goals-Oriented

A recent article in Forbes highlighted the idea that women are often more long-term focused and goals-oriented than male investors. Men, on average, traded 45% more often than women, yet women out-performed men by 0.94% (1997).  A study from 2012-2014 showed women outperformed men in investment returns by 1.2%, which goes to show that the difference in portfolio management and performance is widening as the years go by. This patience and willingness to invest for a long-term timeline means that, as a female investor, you’re setting yourself up for future success.

Women Invest According to Their Values

In general, research shows that women are more interested in investing according to their values. Recent years have shown a dramatic increase in interest in ESG (Environmental, Social and Governance), or impact, investing. This, in large part, is due to more women in the United States controlling more of our nation’s capital - and wanting to invest it in a way that aligns with the causes they want to support (or withhold support from). 

Women Save More

In addition to often earning higher returns due to patient, strategic investing decisions, women have been known to save more, as well. In a study performed by Fidelity, it was shown that women consistently save a higher percentage of their paychecks in their workplace retirement accounts, and put more into retirement savings accounts (like IRAs) than their male counterparts.

Women Leverage Collaborative Partnerships

When looking for a financial advisor, many women are looking for a collaborative partnership - not a third party to outsource their entire financial life. This is one of the many reasons Wood Smith Advisors specializes in working with women to create customized financial plans that prioritize their goals and plan for their lifestyle - both now, and in the future. 

Interested in learning more? Reach out to us today! We would love to talk to you about your unique financial needs. 

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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