Wall Street has long been a notorious boys club, making many women feel like second class investors. But discounting the strengths of the female investor could be a costly mistake. Their attributes have a powerful impact for long term success.
Women possess a number of traits that can make them better at investing. Studies show that long term, many see better returns on their money than men. In fact, a recent report shows female investors outperform their other half by an average of 40 basis points or 0.4%. Over time, that can add up to tens of thousands of dollars in extra income. This isn’t a battle of the sexes, but men may want to take note.
Read on to see why women make great financial decisions, and what you can learn from your fellow investors.
The Vocab:
Risk Averse
The investor who chooses preservation of capital over the potential for an above average return.
Risk Aware
Acknowledging the risks that are present and the process of reducing or eliminating those risks, to understand the potential costs and benefits of a course of action.
Financial Literacy
Possessing the skills and knowledge to make informed and effective decisions for personal financial management, budgeting and investing.
Women Must Make Their Money Work Harder
At TradeWinds, we believe in financial optimism for all. Unfortunately, when it comes to building wealth, women have had to overcome unique challenges.
The gender pay gap is a big one. Historically, many women have made less than men for doing the exact same job, and despite recent progress, in 2022, still earn 17% less on average. Women are often also the ones who take a significant amount of time off to either care for young children or aging parents, or both.
Lower income levels + fewer active working years = less free money to invest
Add to that a longer life expectancy, and it’s clear women have a lot of ground to make up. The good news? Women possess a number of enviable traits that make them more than capable of having money courage and financial success.
Myths vs. Strengths
Let’s dispel some of the myths around the female investor:
Myth #1: Women are indecisive, overly emotional, and self-doubting
Truth: Women are detail-oriented, in it for the long haul, and take a bigger picture view. Because women are disciplined and have a less egocentric mindset, they are more likely to avoid impulsive decisions which allows them to stay on target for their long term goals. By not chasing hot tips and trading on whims, women trade 45% less than men do. Women are fantastic at leveraging emotion with reason when it comes to investing and because of this are able to outperform their male counterparts long-term.
Myth #2: Women are risk averse and avoid investing, keeping their funds in cash
Truth: Women are risk aware – this is a major difference than being risk averse. They want to understand what course of action they are taking and why they are taking it before making decisions. They are much more likely to take on the appropriate levels of risk for their investments than men (less ego). Women simply want to feel educated and knowledgeable in order to gain financial independence.
Myth #3: Women are not as good at math, and not interested in investing
Truth: Women are often the CFO of the household, perfectly confident balancing the checkbook, managing the budget and making large financial decisions. And they are more than interested in investing – over 67% of women are now investing outside of retirement. What they aren’t interested in is being talked down to by a male-dominated industry that communicates in charts and graphs, preferring to discuss financial decisions in a more human way that is relevant to how investing can empower their life.
Investing Advice for Everyone
Women have every reason to be confident in their abilities! They have all of the tools they need to succeed. They are disciplined, have an objective view of their investing abilities and possess a willingness to learn. And they understand the true power of money – as a means to support their goals. These are tools everyone can benefit from and incorporate more in our financial decision-making.
TradeWinds advisors know knowledge is power, and financial literacy is empowering. We work with individuals of every investment level, educating and guiding, so that anyone can take control of their finances with confidence.
Learn More
Because you can never be too financially literate…
- Go here for more insights on women’s investment behaviors
- Read this to learn how to minimize the gender income gap
- Email us here to set up time to talk to a TradeWinds Advisor
As more women than ever take a seat at the investing table, there’s less room for the stereotypical boys club who historically excluded them – and that’s a good thing. It’s high time the old guard that’s only interested in putting money in their own pockets gets put out to pasture.
When women succeed, so does their household and community, and a positive investment climate creates markets for all.
As the saying goes, a rising tide of empowered women lifts all boats.
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