The verdict is out, and according to data, women are, indeed, better investors than men. While it's true that women invest less frequently than men, the numbers show that women investors outperform their male counterparts in returns.
According to a Fidelity Investments study, comprising an analysis of over 5 million client accounts over a period of 10 years, women’s returns outperformed men’s by an average of .4%. A similar study by the University of California, Berkeley, puts the difference in returns between women and male investors at 1%. It may not seem like a big difference at face value, but looking at the bigger picture and over more extended periods, there is quite a significant difference in overall returns.
The big question is, no doubt, “Why?” Let’s delve into four primary reasons why women are better at financial planning, investing, and wealth management.
1. Women Trade Less Often
Fidelity also reports that women trade up to half as often as male investors. Too many transactions driven by relative overconfidence often result in poorer performance. Numerous studies have shown that trading more frequently often leads to lower returns.
On the other hand, women investors patiently embrace the "buy and hold" strategy. The results? Healthy and solid long-term returns. Ironically, it's often a lack of confidence that drives this mentality and holds women from trading more frequently.
2. More Likely to Have a Well-Balanced Portfolio
Women are generally more conservative investors and cautiously seek to have a more balanced portfolio. You will find women investors with a healthy mix of stocks, cash, and bonds. The more diversified and balanced the portfolio, the better its risk/reward potential balance over time.
3. Women Heed Advice
Studies show that more female investors use an advisor than their male counterparts – who feel they can do better than an advisor and, therefore, choose not to engage one. It's essential to point out that women investors will take their time and carefully consider the expertise, investment approach, and experience of any advisor before engagement, as they want someone they can turn to confidently.
Women will actively ask for advice, collaborate, and follow recommendations offered by financial planning advisors. Gut instinct and personal preference take the back burner for women, and by listening to professional advice, women investors make more informed, confident, and financially sound decisions.
4. Women Investors Stick to the Plan
Women investors make an informed plan and stick with it for the long term. It's, therefore, no wonder that women typically remain calm even in the face of market volatility. While their male counterparts will be running to liquidate at the first signs of a market downturn, women investors stick it out.
Only after proper fact-finding do women make the informed decision to change investment and wealth management strategy. Similarly, women are less likely to get sidetracked by the latest trends, which are almost always potentially volatile. Women investors have the discipline to recognize and appreciate that not every new shiny investment opportunity is something to jump on.
Don’t Hold Back
Many studies have cited a lack of confidence in how women invest and manage wealth. This lack of confidence shouldn’t hold you back from pursuing your goals, not when you can engage a qualified advisor.
As outlined, several elements, including patience and humility, make women unique, positioning you to be a better investors. You can move forward with confidence when you count on your advisor and all the resources available to address your concerns and help you work towards your goals.
Don't hesitate to ask as many questions as you may have. Also, be sure to invest your time, and take as much of it as you may need to establish a game plan. An advisor that’s worth their salt will customize every strategy just for you. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.