With the latest attention on women from the financial industry, you might think most women do not participate in investing. As a woman-led firm, we have decided it’s time to set the record straight a bit. More and more women do take responsibility for their investing and research shows they are just as successful, if not more so, than their male counterparts.
The most common stereotype regarding women and investing is that women do not participate or save as aggressively for retirement because they are more cautious. But studies show that what might look like caution to some, breaks down into thoughtful, purposeful and successful investing over time. Women in fact, tend to focus more on long-term goals, research more thoroughly, and more often seek professional help.
By often viewing money as a source of security, women tend to focus on their long-term life goals and aligning their financial goals to the same. Due to this long time horizon, women are more patient or disciplined investors. According to Abigail Sussman, assistant professor at The University of Chicago Booth School of Business, “Women are more likely to give their investments time to grow. This is important because checking returns and acting on short-term fluctuations in stock performance leads to negative outcomes.” Sussman pointed out that men trade 45 percent more than women, and her research showed, the short-term nature of that higher trading led to lower long-term returns.
Women investors also have a record of more thorough research in their investing. LouAnn Lofton, author of, Warren Buffett Invests Like a Girl-And Why You Should, Too, reported that “Women spend more time researching their investment choices.” Women are also more likely to seek out information that challenges their assumptions. Michael Liersch, head of Behavioral Finance at Merrill Lynch Wealth Management goes further in his research concluding that while women often ask more questions it is part of their research to, “Make sure that they understand the purpose of a recommended strategy and how it will help them reach their individual goals.” Both researchers suggest deeper understanding of investments and their purpose adds to investors’ conviction and their ability to stay the course through difficult market environments.
Finally, women investors are more likely to seek out a professional advisor and listen to their advice. A number of studies report that women investors have less confidence in their knowledge than their male counterparts. However, they are much more likely to overcome their concerns by seeking out experienced advice. According to Prudential’s “Financial Experience & Behaviors Among Women, “Women tend to identify themselves as collaborators, with 44% saying they usually rely on some input from a professional advisor but make their own decisions. ” The old stereotype that women are more willing to ask for directions may be true when it comes to investing, and that can always help increase the odds of long-term success.
Fidelity Investments reports that it is estimated women will control over 2/3 of the wealth in the U.S. by 2020. The financial advertising industry may have jumped on this information to define it’s next marketing “niche,” but there is no need. We work with many women who are both single and part of couples and they are intelligently and actively involved in decisions regarding their investments and wealth. Women and men equally have the ability to identify their priorities and lead wise investments in their life even as they come to their conclusion with potentially different approaches. To the many women being bombarded with new financial advertising, we say “Carry On!”