Study Shows That Women Investors Outperform Men — Here’s Why
In this “Financially Savvy Female” column, we’re chatting with Lorna Kapusta, head of women investors at Fidelity Investment, about what makes women savvy investors and how any woman can get started investing. Only a third of women feel confident in their ability to make investment decisions, according to Fidelity’s 2021 Women and Investing Study. But this percentage should be a lot higher — the same study found that women investors typically outperform men. An analysis of more than 5 million Fidelity customers over the last 10 years found that, on average, women outperformed their male counterparts by 40 basis points or 0.4%.
What about women’s investing behaviors make them so successful?
There are three things that we see consistently that make women strong investors.
First, when it comes to saving and investing, women take a holistic approach. They develop a plan — think of this like a money roadmap — based on what’s important to them and what their goals are. Then they align their investments to reach them.
The second is that they’re investing consistently. [They’re] not trying to time the market, but [instead], have set up investing out of every paycheck.
And the last is critically important, which is around practicing patience. They take a long-term view — in other words, more of a “buy and hold” approach. As such, they’re less likely to make rash, emotional moves of pulling money in and out of the market, buying and selling. What they do is they hold based on their money roadmap and goals.
Those three behaviors have been a recipe for success for many women.
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According to the Fidelity study, 65% of women say they’d be more likely to invest, or invest more, if they had clear steps to do so. Can you go over some of those steps?
We still hear from a lot of women that they are waiting to invest because they’re not comfortable with their knowledge of investing. A good way to start chipping away at that feeling is to join the conversation. We need to normalize the conversation about money and make it more part of our everyday. The more comfortable we are talking about financial topics, the more comfortable we’re going to get taking action.
Here are some other steps to think through when you’re thinking about investing :
- Think about your goals. What’s most important to you? What are you growing your savings to achieve?
- [Figure out] how long [it will be] before you need that money. How long do you have to invest? For goals one to three years away, you likely want to keep that savings more accessible, but still look for an account that earns the most interest possible. For savings you don’t need for five, 10 or 15 years (or longer), this is savings that you can invest to help it grow.
- Think about what kind of investor you want to be — about your time, skill and will. Do you have time to learn and manage a portfolio of investments? Do you have the skill? Do you have the interest? That will determine what kind of investor you are — someone who wants to do it themselves, have someone”‘do it for me” or something in between.
The study also found that 70% of women believe they would need to learn more about picking individual stocks before they could get started. If women don’t feel comfortable with picking individual stocks, what are some other alternatives that will enable them to grow their wealth via investing?
For savings that you have outside of retirement and emergency funds that you don’t need to access for five or more years, there are three paths you can take to help that money grow to achieve its greatest potential.
First, you can invest it yourself. There are many online resources that you can take advantage of to learn about different investment options. There are also planning tools that can help you put together a portfolio of mutual funds, ETFs and other types of investments. It’s important that it’s diversified, and those planning tools can help you find the right mix of investments based on your timeframe. But that just takes time upfront to do that research, and you also have to be willing to keep on top of reviewing your portfolio over time.
For those who may not have as much interest or time to do that research and maintenance yourself, a second option to consider is called a digital advisor or robo advisor. You answer a series of questions online. (At Fidelity.com, it’s seven questions that you’re likely already thinking about.) When do I need the money? Is it five years? Is it 10 years? What do I need the money for? What’s my risk tolerance? How comfortable am I to stomach those ups and downs of the stock market? Then, this digital advisor will provide a recommended mix of investments based on your answers. It can invest your money for you, and make adjustments as needed over time.
The third option is speaking to a financial professional. This is always a great option because they will work with you to develop an overall financial plan specific to your needs. They’ll go through all of your goals, help you determine an investment mix and can help you invest that money. We do still hear many women who think they don’t have enough money to be eligible to work with a professional, but that’s really not the case. There is help available for every kind of investor, regardless of income or how much you have saved. That’s really the best first step — make that phone call and talk through these options with a professional to help you get started, and determine what approach is best for you moving forward.
GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.
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