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Why Women Are Better At Investing

Updated: Nov 24, 2021

According to a study done by Fidelity Investments, women investors are still outperforming their male counterparts. Study after study continues to show that women are better investors than men. So why don't more women invest? Well today we are here to break down why that is; why women make better investors; and why it's important for women to have an active role with their money.

Why do women make better investors than men?

In 2021, Fidelity Investment's 2021 Women and Investing Study revealed that, although many women lack investing confidence, their portfolios continue to outperform their male counterparts.

Here are some key findings from Fidelity Investments:

  • Many studies show that women investors achieve better returns than men

  • Women's portfolios performed better than men's by 40 basis points (0.4%)

  • In 2015, women lost 2.5% of their stock portfolio value, versus men who lost 3.8%

  • Women stay the course by trading stocks and changing asset allocations less often than men do

One explanation for why women make better investors is that women tend to have a "buy-and-hold" investing strategy versus men who tend to frequently trade, which tends to stunt performance over time. Data shows that women don't tend to react to market fluctuations the same way that men tend to. MIT released a study that found married men over the age of 45, who consider themselves having "excellent investment experience", are actually more likely to panic sell during a downturn. Panic selling is not a winning investment strategy.

During the recent downturn in global stock markets, Ellevest (a robo-advisor targeting women) indicated that they received net inflows of money; indicating that their clients were investing more money while the stock market was struggling. This is the first part of the saying, "Buy Low, Sell High". While other investment companies were seeing their clients selling off their investments in fear (selling low), the likely female investors at Ellevest were taking advantage of the low prices on the stock market and reacting intelligently, not emotionally.

What makes women better investors, and what we’re doing right, is:

  • Saving a respectable portion of our income - women tend to save more than men (where we can improve is investing a higher proportion of that saved money);

  • Trading at a reasonable frequency - not trading out of fear, and keeping our eyes on the long-term goal;

  • And choosing investments that lead us to outperform men - some studies report that this is achieved by doing our homework rather than listening to a hot stock tip from someone we know.

Why don't more women invest their money?

While progress is being made in terms of more women investing their money and taking proactive steps in their financial journeys, only one third of women feel confident in their ability to make investment decisions. Women have historically been less confident in their investing skills compared to men. Data shows that 71% of men assess themselves as having high levels of investment knowledge, whereas that number is 54% for women.

You could blame this on lack of education (men may be more likely to discuss finance and an informal education may be gained), and the fact that money and finance have always been predominantly centered around men. Ellevest revealed that nearly 3 quarters of all money articles that are targeted to men center around growing money and investing; in contrast, 90% of money articles targeted at women are negative and center around spending less.

Another possible explanation is the gender pay gap. Women are still paid less for equal work, and they tend to go into roles that pay less. In addition, women are more likely to take sabbaticals for maternity leave and elder-care responsibilities, and women are more likely to work part-time at some point in their lives. Having less income means having fewer funds to invest.

With that all being said, it is heartening to know that investing confidence does in fact increase with age among women (see graphic on the right). But for millennial women, 56% of whom say fear holds them back from investing, it is unfortunate their level of confidence is so low, considering their long investment horizon.

Women are already great at saving their money, with higher savings rates than men. But more women need to be investing those savings. Though it's never too late to start investing whatever age you're at, it is most beneficial, and will pay off more in the long run, if you start early. Today is the youngest you’ll ever be.

Why is it so important for women to have an active role with their money?

When women have an active role with their money and are financially successful, it doesn't just benefit women. It benefits men too. The patriarchal assumption that men are in charge of the money and finances, and that men have to be good with money, can actually do some real damage. This societal pressure is quite unhealthy and harmful for everyone.

Furthermore, as we've talked about in previous blog posts, women need to have an active role with their money as a matter of safety and security. Access to money is crucial because it determines what women, and anyone for that matter, can and can't do. Not having an active role can lead to financial dependency, power imbalances in intimate relationships, and forms of abuse. Not having an active role with their money leads women to having to rely on their partners for their finances - which can make it harder to leave an unhealthy or abusive relationship, let alone have any sort of control in it.

Perhaps the most important reason women need to have an active role with their money is for their retirement plan. In terms of life expectancy, women actually tend to outlive men. In 2019, the life expectancy at birth was 76.3 for men, and 81.2 for women. Since we live longer, we need more long-term savings; nobody ever really tells us just how expensive retirement is.

How can we get more women to invest?

Keep the momentum going! It is clear that women are on the right path, and we're doing a lot of things right in terms of investing. One of the best ways to keep up this momentum is to keep the conversation going. When women open up their money struggles, their financial journeys, salaries, and their investments, other women feel more comfortable and confident to take the proactive steps in their journeys, including starting to invest!

So we really encourage you to be open with the women in your life about money, you'd be surprised how much of an impact it will have. And if you don't feel comfortable doing that just yet, we here at Untangle Money offer a safe environment and community of women ready to talk, listen, and share.

How to get started with investing?

We've talked a lot about investing on our blog before, so here are some links to our best investing blog posts:

Investing your money means you're making your money work for you, setting yourself up for financial success. Not only that, financial success and financial freedom give women power - power that has long been denied to us.

What's next?

You can follow us over on Instagram, Facebook, Pinterest, and LinkedIn to see more content about personal finances and planning for your financial future. You can also check out our other blog posts here!

Financial independence is a huge part of being a strong, independent person, and it is our mission to help women, and anyone who doesn't feel safe or welcome in financial spaces typically dominated by cis men, set themselves up for financial success.

At Untangle Money we help women understand their (real!) financial picture, and obtain financial guidance from people that actually, really, get it. We would love to help you, too! Join the community of hundreds of other women looking to strengthen their financial well-being. You can check out our products and plans here or get in touch for a free consultation!

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