Women have been left out of the finance conversation for too long, leaving the industry to be dominated by men and harming women's ability to succeed as investors. Despite the gender disparities imposed on women from the gender wage gap to the financial literacy gap; women consistently outperform and earn better returns than men.
Women's investments exceed men by 40 basis points (0.4%) according to Fidelity's “2021 Women and Investing Study” which looked back at investors over the past 10 years. This is not the first time that women have proven to be better investors. Over the years numerous studies have shown that women perform better and suffer fewer losses than men do when investing. When the stock market crashed in 2015 reported female investors lost an average of 2.5% that year, whereas men averaged around 3.8%. In 2020 Goldman Sachs reported that 48% of female-led hedge funds outperformed the market, in comparison to 37% of male-led firms, not to mention that women-led funds fared better throughout the pandemic's collapse.
Before diving into women's approaches to investing it is important to acknowledge the gender inequalities associated with finance and investing. Unfortunately, societally ingrained gender roles that are imposed onto women have influenced our ability to participate in the finance sector. Women are educated on finances differently with less focus on investing, leading women to feel less confident. Only about 14% of women reported feeling like they know “a lot” about saving and investing.
From independent retail investors all the way to Wall Street, women are not being represented especially when only 26% of American women are invested in the stock market. You would think that with women's demonstrated success rates, there would be a stronger demand for female executives, but one of the largest inequalities in finance is in hedge fund leadership positions. Even with women's more favourable outcomes, CNBC reported that 40% of women have no ownership of any investments at all. Furthermore, of those women not investing, women of colour specifically Black women (59%) and Hispanic women (48%) are even less likely to own investments.
Women have unique and useful characteristics that can help virtually anyone become a better investor.
Women approach money and investments in a more holistic & value-oriented way using more research-based decision-making processes. Women are known to spend more time researching their investments, considering their risk, and goals as well as more prone to seek out data that contradicts their preconceptions. Investors who conduct extensive research are less likely to chase hot recommendations and are less likely to succumb to impulses while investing.
Risk management is a huge component of women's success with investing, the goal is less focused on beating the market and more focused on minimizing risks. Research has shown that men are nearly 10% more likely to be taking big investment risks for the potential of higher returns than women. Women diversify their investments across industries and assets, so that if one market declines, only some of their portfolio is impacted. By accurately measuring one's risk, investors may maintain a level head and devote time to research.
Investing in the long term is one of the most effective ways to succeed in the stock market. Women tend to focus on lifetime goals such as retirement as a means for investing and look to long-term strategies as the best way to accomplish them. Men tend to focus on outperforming the market rather than reaching certain goals when investing. By developing a long-term strategy that helps you to reach personal or lifetime goals many women tune out market noise and plan out their investments. Women using this type of strategy are able to find investments with consistent growth, and then hold onto them for the long run even with market volatility.
According to Vanguard women participating in the stock market trade around 40% less frequently than our male counterparts, leading to men's investments being reduced by about 1%. This is not to say there aren't strategic moves to be made by trading, but increased trading can reduce returns and sometimes be a sign of overconfidence. Being patient with investments is something identified more often in women. Using a more disciplined approach to investing involving research and patients many women set a target price and reevaluate it when the price approaches that level rather than just selling it off.
Investing can be challenging and daunting at times, but it is one of the most efficient methods to increase your wealth. Women are powerful investors and cannot be left out of the conversation any longer. None of these approaches to investing are exclusive to women (look at Warren Buffett), both men and women can benefit from learning about each other's investing patterns. Through efficient research, strategizing carefully, you can make investment decisions like women and earn as much money as possible in your returns.
Utradea makes it easy to become a better investor through personalized and actionable investment ideas and insights powered by social intelligence and automated analytics. Combined with the diverse and supportive community of investors, you can take your investing to the next level The future of investing is here, and it starts with Utradea.