Want to Be a Better Investor? Think Like a Woman

By Brandon Miller, CFP–

March is Women’s History Month. Like Black History Month, it seems sad that so many people have been erased from U.S. history that we have to set aside months to help tell their stories. But it’s also heartening that compelling narratives are finally coming to light from a much wider diversity of the movers and shakers from our past.

It seems to me that ignoring the contributions of any of us diminishes all of us. There is so much to learn from each other if we can just acknowledge that no one group has a monopoly on intelligence, creativity, or courage.

Take, for example, how men can learn how to invest better from women. Seriously. Study after study (see the last section of this piece) shows that women investors generally outperform male investors. We’re talking earning higher returns while taking on less risk, an ideal combination.

So, what’s their secret?

Turns out, some of the things that women seem to do naturally are perfectly suited to successful investing. Getting in touch with your feminine side then can potentially help you achieve better investment results.

Here’s what women do right when they invest that you can learn from:

• Save more. The best thing women do for themselves as investors is to put aside more of their earnings than men generally do. This may be a bit surprising, given that they usually bring home less of the proverbial bacon. But women often take the long view, which means that they have the patience to let the miracle of compounding turn small, regular contributions into hundreds of thousands of extra dollars down the road.
  
• Focus on goals. Perhaps women save more because they tend to view investing as a way to accomplish life goals for themselves and/or their families. Men too often view investing as a competition, a perpetual game of “beating” the market. Rather than make investing decisions based on whether they advance life goals, too many men want to find the next big thing and score fast wins.
  
• Take less risk. A tendency to be more risk-averse than men is another trait that works in women’s favor for investing. Women are apt to use an asset-allocation strategy—just as every financial professional suggests—in an effort to protect their money and maximize the efficiency of their investments. Target funds are particularly popular among women, perhaps due to their simplicity of managing risk based on when you need the money.
  
  Men, on the other hand, often suffer from overconfidence that can lead them to take on more risk than is appropriate for their circumstances, or is needed to achieve similar results. They’re also more prone to commit the financial sin of chasing returns, which too often results in “sure things” fizzling out without profiting the investor.

• Buy and hold. Patience is a virtue, as the saying goes, though, for some reason, it is considered a feminine one. Wouldn’t you know it? Patience is exactly what you need for the buy-and-hold strategy championed by financial professionals.
  
  Men, perhaps in an ongoing attempt to beat the market, have a tendency to buy and sell investments more often than women—about 35% more often, according to one Fidelity Investments study. Endless trading can lead to higher fees and a lower return, which is obviously no one’s goal.

• Admit they don’t know it all. Women are much more likely than men to ask questions, do research, and consult with friends and professionals before making decisions about their money. Too many men plunge right in and buy or sell an investment without always understanding if it actually benefits them.

Of course, these attributes can also have a negative side. Not taking on enough risk to let investments grow adequately or being paralyzed by too much information and indecision can work against women—and any investor, for that matter. That is why I advocate for everyone to become an informed, confident investor. And why I write this column!

In a nutshell, if you want a healthier portfolio, try taking a long-term view, saving more and trading less—just like women naturally do. And don’t be surprised if, one March day in the future, you hear a story about some incredible woman who revolutionized the investment industry.

Recent Studies

Stevens, Pippa (2020), “Women-managed funds are outperforming as tech exposure pays off, Goldman finds” https://tinyurl.com/zaspr3bx

S&P Global (2019), “The Financial Future Is Female” https://tinyurl.com/3uktn8n2

Wells Fargo Investment Institute (2019), “Women and Investing: Building on Strengths” https://tinyurl.com/wtp3fz2b

Association of Certified Chartered Accountants (2017), “Why women are better at making investment decisions” https://tinyurl.com/tha6za8y

Fidelity Investments (2017), “Fidelity Investments Survey Reveals Only Nine Percent of Women Think They Make Better Investors than Men, Despite Growing Evidence to the Contrary” https://tinyurl.com/v33jemhp

The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. Brio does not provide tax or legal advice, and nothing contained in these materials should be taken as such. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.

Brio Financial Group is a registered investment adviser. SEC Registration does not constitute an endorsement of Brio by the SEC nor does it indicate that Brio has attained a particular level of skill or ability. Advisory services are only offered to clients or prospective clients where Brio Financial Group and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Brio Financial Group unless a client service agreement is in place.

Brandon Miller, CFP®, is a financial consultant at Brio Financial Group in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.

Published on March 11, 2021