Stan Choe of the Associate Press recently ran a piece in the Boulder Daily Camera titled, “Many women think men are better investors; they’re not.” In it, he cites research by Fidelity Investments that although the performance difference is small, women investors did better than men by an average of 0.4 percentage points. He’s quick to point out the danger of generalizing based on small pools of data, but it is supported by other research that suggests women tend to take a longer-term view of investing and tend towards lower risk. He also acknowledges that there are other studies that show men doing slightly better than women over different periods of time. The key word here is slightly. Any difference in investment performance between women and men is just that, slight.
So, why do many women lack confidence in their ability to invest? And why is the prevailing opinion of both men and women that men will do better when it comes to their returns? (This is based on Fidelity’s poll showing that only 9% of both men and women said they thought women earned higher returns in 2016.)
Sallie Krawcheck, a former Wall Street executive and founder of Ellevest, a female-focused digital investing and financial planning platform, refers to the issue as The Investment Gap (an extension of the gender gap in America) and believes that Wall Street and big banks have done a poor job engaging women investors. That, coupled with the fact that the financial industry itself is one created and largely run by men and for men, leaves many women out of the conversation. Most attempts to target women investors have been what Krawcheck deems “women’s initiatives refracted through the brain of a man.”
So, what’s a woman to do? Barbara Stewart, veteran portfolio manager, currency expert, and author of the Rich Thinking series, provides some advice to females in her whitepaper “A Guide to Building Confidence in Girls and Women.” That advice can be applied to a broad range of financial practices and principals, including investing. Some of her tips are among those below:
- Start young.
- Invest whatever you can. Don’t delay because you think you need to invest large.
- Take the time to educate yourself. Financial literacy need not be complicated and dry. Try following one of the many podcasts out there on money and investing.
- Know when to ask for help. Don’t pretend to understand your finances if you don’t. Ask questions.
- If you are new to investing and reluctant, bring a friend. Encourage a fellow female to join you on your road of financial discovery.
- Seek out local women’s investment meet-ups.
- Partner with a trusted financial advisor who can help you define and meet those goals. Choose a fiduciary and a fee-only financial planner who will keep your best interests at the center of your relationship.
- Identify and focus on your individual goals, not on what everyone else may be doing.
- Don’t get emotional when investing. Remind yourself to stay focused on the long-term.
- Respect money, but don’t let it define you.
So, ladies, you are better than you think when it comes to investing. The research supports it; now it’s up to you to live it.