Why Women make great investors

If I could tell my younger self something -- begin investing as soon as you can afford it.

If I could tell my younger self something -- begin investing as soon as you can afford it. We know one of the paths to wealth is to invest, so why is it that women oftentimes shy away from it? I feel this occurrence is very similar to how women mostly apply to jobs where they meet most of the requirements, whereas men apply when they meet about 60% of them. 

One of the magical ingredients necessary for growth in investments is TIME. However, when it comes to investing, it is men who are the most active in the stock market. Currently, about 66% of men invest in the stock market, as opposed to 48% of women (Nerdwallet). Leaving a gap in women who can potentially benefit from the growth in the stock market.

The investing gap could be attributed to gender norms and how we teach money management to women and men. Women tend to be told to spend less and budget more, whereas men receive more investing advice. This could also contribute to women feeling more anxious about investing . Moreover, knowing that women tend to live longer and earn less, which makes the need to invest a priority. 

Here is what the research says that makes women better investors: 

Consistency

Women are more likely to buy and hold which is a recipe for higher long-term returns. As markets fluctuate, it can be hard to time when to buy or sell, but holding and continuing to buy in a down market can result in higher returns because you invested at a “discount.”

More risk averse

Women are more conservative in their investing approach and are more likely to have less of a portfolio turnover. This can be good to compare to the more financially active men who will sometimes do more trading. While trading is good, high portfolio turnover can oftentimes, result in higher fees. Having a well-balanced portfolio across various asset classes, buying and holding can result in higher returns. (Bogan).

Women are more likely to ask for help

A 2021 Fidelity study reported that women would be more confident in their investment when they worked with a professional. Asking for help can go a long way in not letting your ego dictate your investment decisions. Difersiying your knowledge can lead to more confident choices and move women into the stock market (Fidelity).

Long Story Short

I have also felt intimidated and fearful about how to invest (the funds that sat in my ROTH IRA uninvested will attest to that). I am convinced that the longer we stay out of investing, the more it will hurt us in the long run. The way I fought through my fear was through education. I read and googled, and while I have not hired a financial advisor yet, that is not a service I am discounting for the future. Robo-advisors also make investing attainable for those investors who like a more hands-off approach.

Side note:

A 2021 study by BNY Mellonfound that if women invested at the same rate men did, $3.22 trillion that would enter the market. That just goes to show how much power women have in the economy. If you are reading this, you are probably on an investing journey and curious about the topic - which seems like a win win to me.

Stay rich & until next time,