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Women and men differ when it comes to investing.
However, while many may view women as the weaker sex when it comes to investing, female investors actually earn higher rates of return than their male counterparts.
Women outperform men by 40 basis points, or 0.4%, on average, according to Fidelity’s 2021 Women in Investing Study. This positive margin can translate into tens of thousands of dollars over time.
Additionally, women have made significant gains in asset accumulation, with 67% of female investors surveyed saving beyond their retirement accounts, up from 44% in 2018. Meanwhile, nearly 50% have saved 20 $000 or more outside of their retirement accounts and emergency funds. , with 20% savings of $100,000 or more. This additional savings can translate into considerable long-term assets.
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If female investors have a weakness, it is that they mistakenly believe that they are not good investors. The Fidelity study reports that only a third of women surveyed see themselves as investors, meaning only 33% feel confident in their ability to make investment decisions.
Over the years, as a financial advisor, I have observed the unique strengths of the female investor. Working with countless clients, my team and I have discovered that as a group, these women share certain characteristics that make them both savvy savers and intuitive investors.
At the risk of sounding like we’re stereotypical – we know everyone is different – we believe that everyone should place a high value on these characteristics when making investment decisions:
- Reflection and discipline. Although we found that male clients tend to eagerly invest in the latest asset class everyone is talking about, like cryptocurrency, female clients generally don’t jump on the shiny bandwagon. They tend to take their time to explore investment opportunities and stay longer in their investments. This mindset follows one of our firm’s guiding principles in wealth management: Sooner or later, the consensus is always wrong.
- Curiosity and interest. In our experience, women are more engaged in learning the “how” and “why” of investing. They want to understand the planning, investment selection, and management processes to make informed, confident, and stress-free decisions. We encourage them to take ownership of their financial planning and investing processes by digging deeper into how they want their money to work for them and align with their goals, including their values, as well as how they want investment decisions are made and the information they want. to share (or not) with their partners.
- Trust people and processes. We have had the opportunity to separately invest the assets of heterosexual couples in situations where each partner was independently wealthy prior to their relationship. What we have found is that more often than not, the female partner realizes higher returns on investment than her male counterpart. We attribute this income incongruity to the female investor not thinking too much about her strategy and her tendency to accept and follow advice once she has established trust in her advisor.
- Openness to advice and collaboration. Women appreciate the power of partnership, and we encourage female prospects to interview us early in our relationship to ensure they’re building a team they can connect with. Are they comfortable discussing their decisions with us, as well as having us work with their accountants, lawyers and other advisors? We suggest that a team of advisors include women, as well as men, from different backgrounds who can benefit from each other’s varied experiences, expertise and investment approaches.
Through studies and real-life experience, we can categorically debunk the old wives’ tale that men are better investors than women. In fact, we can point out specific situations and traits that show that female investors are the stronger sex in investing.
So the next time you make an investment decision, consider investing like a woman. It will probably pay off.
— By Meghan Railey, Co-Founder and Chief Financial Officer of Optas Capital