There seems to be some debate among financial advisors about whether women need to invest any differently than men, simply because they’re women.

The notion that one’s gender might factor into their investment strategy is based on various realities women face, including that, on average, women live longer than men, make less money, and typically spend fewer years in the workforce (which results in lower Social Security income). Women also have higher healthcare costs due to their longevity.

Figures from 2017 show that women are paid about 82 cents for each dollar a man makes, based on median salaries for full-time workers, according to the Bureau of Labor Statistics.

That translates into a woman having to work about four more months per year to make the same annual salary as a man, points out Nadine Gordon Lee, CPA, and co-author of “Personal Financial Planning for Executives and Entrepreneurs: The Path to Financial Peace of Mind.”

Meanwhile, the average American woman is expected to live about five years longer than the average man (81.3 years vs. 76.3 years), according to the Kaiser Family Foundation.

“Greater longevity is one of many reasons women aged 75 and older are almost twice as likely to live in poverty versus men of the same age,” said Gordon Lee. “Of course, one of the biggest financial risks as we age is the cost of healthcare.”

For all of these reasons, it can be argued that a woman might need a slightly different investment approach than a man, in order to create a suitable safety net for their particular reality.

• What Should Women consider When Investing?
• How do Women View Finance and Investing Differently Than Men?
• What is the Difference Between Male and Female Investors?
• Why are Women Better at Investing than Men?
• 5 Truths About Female Investors
• What Should every Woman Know About Investing?

What Should Women consider When Investing?

1. Don’t Leave Too Much in Savings

Stephanie Genkin, a Brooklyn-based certified financial planner, regularly hosts workshops focused on women and investing, and also works one-on-one with many single, professional women.

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Investing, says Genkin, is a critical component to a woman’s financial future, but many smart women are afraid to get involved because they don’t fully understand risk.

“Very often when I do a first-time review with a woman, I see too much money sitting in cash in a savings account earning next to nothing. Women are often good savers, but it’s not helping them reach their long-term financial goals,” says Genkin.

In fact, she says, the only asset that’s guaranteed to lose money over the long term is cash.

“You think it’s safe but it’s losing to inflation year after year,” continues Genkin. “Your money for the future is rotting in the bank if you aren’t focused on investing.”

2. Examine Your Stocks-to-Bond Ratio

Take a good long look at your retirement account, whether it’s a 401(k), an IRA, or some other investment vehicle. Is the lion’s share of money sitting in stable value funds? Money markets? Or other low-growth or no-growth assets?

It may be time to shift that asset allocation, says Genkin.

“Many women were spooked by the financial crisis 10 years ago and they got the wrong message about investing. Others are put off by investing jargon and don’t know what they are supposed to do,” said Genkin. “The risk isn’t losing all of your money, especially if you’re well diversified — it’s actually outliving your money.”

In terms of your stocks-to-bond ratio, the rule of thumb is the more time you have until you need the money, the more stock-heavy your investment portfolio should ideally be, said Genkin.

Stocks are the growth engine. They’re volatile in the short run, but provide more growth opportunity in the long run, she added. If you have 15 or more years left in your investing timeline, make sure your investment portfolio isn’t too conservative.

Allison Alexander, of Illinois-based Savant Capital Management, echoes Genkin’s sentiments on this front.

“Worried about preserving their assets, women often invest too timidly,” said Alexander. “No matter what your age, keep a portion of your investments in stocks. Every person’s situation is unique, and in order to keep up with inflation and grow your wealth, it is important to participate in the stock market.”

3. Maximize the Power of Compounding Returns

Because women typically live longer, it’s imperative to maximize returns for the future by starting an investment program today and allowing compounding to work its magic.

“To truly appreciate the power of compounding returns, buy shares of stable companies that pay dividends and enroll into a dividend reinvestment plan offered through a company or a dividend purchase plan offered through your brokerage or bank,” advises Victor Chiu, author of “Wall Street Kitchen: The Recipe Behind a Housewife’s 1,000% Stock Return.”

Several sectors can offer relative stability when pursuing this approach, suggests Chiu, including the financial industry (think: banks and life insurance companies); utilities (electric and telecom companies), and infrastructure, such as railways and airplane manufacturers. Chiu also suggests looking at technology companies and food and beverage producers.

4. Diversify with International Exposure

Over the long term, international and emerging markets offer better potential growth rates, making them a good option for women, suggests Katie Vercio, certified financial planner with Evergreen Gavekal.

“Investors as a whole can be very focused on short-term results, such as how the investment performs within a six- to 12-month time span. I think international markets have a lot of growth potential over the next five to 10 years,” said Vercio. “Thinking long-term for women is particularly important as we are expected to have a very long horizon based on our average life expectancy.”

5. Investing for Social Impact

Not only should women adjust their retirement portfolios to reflect their longer lifespans — women often want their investments to reflect their values as well, says Ellen Remmer, creator of Invest for Better, a platform designed to help women use their money for social impact.

“What we know is that study after study has shown that women want to invest with their values, and they care about the purpose of the money in the context of meeting their financial security,” says Remmer.

However, because of time poverty, women simply do not spend as much time focused on investing as men do. A recent Fidelity study found that only 18% of women are the primary decision makers in relationships when it comes to long-term retirement and investment planning.

Remmer says social impact investing offers women an avenue to truly connect with their money in a way that has meaning for them, motivating them to become more actively involved.

“I don’t have research on this, but my experience was that when I started participating in responsible and impact investing, I found investing so much more engaging because it had so much more meaning,” continued Remmer. “It wasn’t just a bunch of numbers. I was helping to create better paying jobs or create a new technology, or improve the circular economy in terms of food waste.”

Women, says Remmer, have the power to unleash meaningful social change through their investment choices and need to bring their values to the fore of financial decision-making, much as their leadership drives commerce, politics, activism, and culture.

6. The Case for Ignoring Gender

There are plenty of financial advisors who point out that investment decisions should not vary based on gender. Rather, decisions should be based on one’s unique life circumstances and finances. It’s a valid point, one worth noting.

“Women on average live a few years longer than men, but all things being equal—hardly a reason to create different financial strategies,” said Len Hayduchok, a certified financial planner with New Jersey-based Dedicated Financial Services.

The bigger issue, said Hayduchok, is the different views tied to risk taking. Men tend to be more willing to take risks associated with investment.

Vercio, of Evergreen Gavekal, offers a similar analysis. “I don’t think that men and women need to invest differently to achieve their goals, but I think that many women have biases to overcome that can hinder their financial success,” she explained. “One of the biggest things that I see is that women are not comfortable investing, so they often avoid it all together.”

Women, continued Vercio, can be extremely fearful of making the wrong investment, and tend to be more focused on short-term results.

“Many women suffer from a lack of confidence, and in my experience, the only way to become more comfortable is to take action,” she said. “My advice is to do some research, start small, and think long-term.”

How do Women View Finance and Investing Differently Than Men?

Men are financial daredevils who like risk, and women are cautious and want security — that the standard cliché. Said another way, men are thought to be more risk-friendly than women. Or to rephrase the title of a bestseller, “men buy shares from Mars and women have a savings account on Venus.”

Investing Differences Between Men and Women

Articles published in the Swiss newspaper Neue Zürcher Zeitung (NZZ), and in various other sources, shed some light on the combination of myth and reality in these gender-focused financial stereotypes.

In an interview with the NZZ, Christine Schmid of Credit Suisse explained that the sub-discipline of gender finance deals with the social differences between men and women. Anja Peter, of Bank Coop in Switzerland concurred that “naturally, there are differences between men and women, biologically and socially, and this is reflected in investment behavior.”

For instance, women are generally more interested in such issues as ecology, ethics and microcredits. However, when it comes to the crunch, this interest does not always have an effect on the actual investment decision.

Another study conducted at the Centre for Financial Research at the University of Cologne found that female fund managers switch around their portfolios less than their male colleagues. Furthermore, women’s strategies, and the subsequent performance, tend to be more stable.

Women and Risk Aversion

The German Institute for Economic Research (DIW) evaluated data on the investment behaviror of more than 8,000 men and women.

At first glance, the study seems to confirm the standard view, but not all that strongly, as 38% of women were invested in risky financial products, such as stocks, whereas it was 45% for men.

However, the DIW does not believe this confirms an inherent risk aversion on the part of women. A regression analysis found that women would take more risk if they had more money. Women generally had about half as much to invest as men, which inevitably compelled them to be more cautious — that may be the real reason for the apparent risk aversion.

Financial Career Barriers and Education 

In the same vein, there are still relatively few women applying for jobs or working as financial researchers or brokers. Schmid believes that women continue to gravitate to fields where there are other women but hopes that these barriers will break down over time.

Interestingly, studies by the German Comdirect Bank and the DAB revealed that while women had less confidence in their financial knowledge than men, this was not matched by poorer investment choices and management.

The study found that 58% of men rated their financial understanding as good or very good, but only 47% of women said the same. Furthermore, a large sample of almost half a million private portfolios demonstrated that in 2007 and the crisis year of 2008, women did 4-6% better than men on average.

Women in Investing Moving Forward

Over time, these differences are likely to decline but not disappear altogether. After all, there are centuries of entrenched gender roles, and elements of those still remain — and to some extent for the foreseeable future.

Nonetheless, we can certainly expect many of the behavioral trends to diminish. After all, never before have there been so many highly qualified women who earn well, have money to invest and want do so securely and optimally.

This in turn will lead to a number of new programs that focus on woman who invest. The International Finance Corporation’s “Banking on Women” program is an example and has been followed by many others over time. The presence of female investment clubs is another sign of the times.

Barbara Aigner, of Emotion Banking in Austria, believes in a specifically female customer segmentation. She divides the female customer segment into three groups:

• “self-conscious, pleasure oriented” younger women
• “interested and open-minded active” women who are more interested in what the bank offers
• “traditional conservatives” who are loyal and risk averse

What is the Difference Between Male and Female Investors?

That men are more aggressive than women isn’t news, but how that translates to their investment styles can determine the success of each group. Two recently released studies looked at how women and men differ on investing, and how it can affect their portfolios.

The FINRA Investor Education Foundation in league with George Washington University found how women lag behind their male counterparts in investment knowledge and confidence, while a Money Crashers survey found that men definitely have more confidence, but that’s not always a good thing.

In a 10-question question quiz measuring investment knowledge, the FINRA/GWU study found that only 8% of women vs. 21% of men got 80% or more answers correct, indicating a high level of investment knowledge.

And 40% of women vs. 26% of men answered only 30% or fewer questions correctly, indicating a low level of investment knowledge, according to the research.

Other findings from the study found that 57% of men vs. 44% of women felt confident that U.S. financial markets offered good long-term opportunities. In fact, 71% of men assessed themselves as having a high level of investment knowledge (vs. 54% women). Less than half, or 49%, of men feel comfortable making investment decisions, vs. 34% of women.

Looking at the psychology of investing differences between men and women, the Money Crashers survey found men were twice as likely as women (22% vs. 11%) to believe their investment returns beat the broader stock market.

The majority of men, 59%, preferred to manage their own investments vs. 34% of women. In fact, 47% of women said they preferred using a professional advisor, versus 27% of men. Eleven percent of women used robo-advisors, versus 12% of men.

The abundance of male confidence can actually lead to destructive investment behavior, according to the Money Crashers study. It quoted a study by the University of California-Berkeley, which found men traded 45% more than women in the 1990s. This behavior reduced the men’s returns because it caused overtrading and brought on higher transaction costs, the study stated.

The FINRA/GWU study did find that those investors, both male and female, who had high confidence were more likely to have higher investment knowledge. This knowledge, or lack thereof, is correlated with how people plan for the future.

It found that 73% of those with high investment knowledge, both male and female, were more likely to plan for retirement, vs. 62% of those with low knowledge levels.

Similarly, 90% of those with higher knowledge had emergency savings vs. 78% of those who had low investment knowledge. Only 21% of those with high investment knowledge felt anxious when thinking about personal finance, vs. 48% of those with low investment knowledge.

Performance Matters

A 2017 Fidelity study found that women actually outperformed men by 40 basis points per year. The study stated “many of the characteristics some view as being inherently female are actually factors that may be helping women see strong returns on their investments.”

Money Crashers found that one issue is men take more financial risks, or “tend to be more adventurous.” It stated that men were most confident in trading stocks, real estate and bonds. Women ranked real estate the highest, followed equally by stocks and bonds.

“We found that men opted for less-certain assets like stocks‚ 21% of men polled in the survey said they were very confident in stocks as a long-term investment, while only 5% of women felt that way,” stated the study. “Women preferred less volatile assets such as real estate.”

That said, a majority of both sexes were in the stock market, although it came to about 51% of women and 74% of men.

Women take a longer-term approach to investing, according to the survey, while men “don’t leave their investments alone to grow. They believe they can outperform the market,” the study states.

Other findings showed that women were more “committed” to the idea of socially responsible investing. When asked about the importance of a company’s social mission, 49% of women said it was extremely or very important to them. Only 29% of men echoed this.

Why are Women Better at Investing than Men?

When it comes to investing, men dominate the field: Look at any picture of a trading floor and you’ll see a virtual sea of male faces. Research from Morningstar shows that men make up over 90% of all U.S. fund managers, with women running just 2% of the industry’s assets.

And yet, study after study shows that when women do invest, they do it well, outperforming men in many cases. In 2001, researchers found that women outperformed men by close to 1% per year, largely due to men’s propensity toward frequent trading.

More recent data continues to back that up. Women were more likely to stay the course during the recession, Vanguard says. Robo-advisor Betterment’s analysis of its data found similar results. SigFig, another robo that offers a free portfolio tracker, found that of those portfolios, men were 25% more likely to lose money in the market.

In fact, it’s tough to locate research that finds women aren’t superior investors. So what’s their secret? Turns out they have a few.

1. They’re more likely to save

Men have retirement plan balances that are roughly 50% larger than the average and median women’s balance, it’s true. But that isn’t the result of women’s failure to save; in fact, women are actually more likely to contribute to an employer retirement plan.

Better still, according to Vanguard’s data, they save at higher rates across all income levels — between 7% and 16% higher than men’s savings rates.

The discrepancy, of course, is the wage gap — though women are participating, and contributing a greater percentage of their income, those incomes are lower so they’re stashing away less money overall. Still, aiming to save 10% to 15% of your income is the first step toward a bigger retirement nest egg.

2. They’re less likely to tinker

No, you shouldn’t set it and forget it. Even if you’ve elected to invest in a target date fund or through a robo-advisor — both of which do the work of rebalancing for you — it’s wise to check in on a regular basis to make sure your portfolio is performing as it should.

But messing with your asset allocation too much can be equally destructive, and research shows men are much more likely to fall into this trap. One trouble, according to that 2001 research, is overconfidence: In that analysis, titled “Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment,” researchers Terrance Odean and Brad Barber found that men traded stocks 45% more often than women, resulting in higher costs and lower returns.

Betterment’s much more recent analysis of its customers found that the company’s female customers changed their asset allocation 20% less frequently and monitored their accounts 45% less frequently than male customers.

As Dan Egan, Betterment’s director of behavioral finance and investing, noted in the analysis, investing is a “job that pays you more the less often you come into work. Studies show that men seem to think they have to work hard, while women take a vacation and earn more.”

3. They ask for help

They not only ask for advice — women are more likely to use a financial advisor, which may be a result of that confidence gap mentioned above — but they listen to the advice that’s given.

According to the Betterment research, the majority of its customers followed its asset allocation advice. But among those who deviated, men were more likely to take on more risk, moving into a 100% allocation toward stocks twice as often as women.

They were also six times more likely to make large allocation swings, like abruptly moving from a portfolio allocated completely to stock to one allocated completely to bonds. Those kind of reactions are often an attempt to time the market, something most of us know doesn’t work.

5 Truths About Female Investors

They say that men are from Mars and women are from Venus.

We aren’t so sure we’re from different planets, but there are definitely differences when it comes to investing. With Women’s History Month in full swing, we take a look at five key facts about women as investors.

1. Women are more risk-averse

Women statistically play it safer than men. They are less likely to run yellow lights, and they are more likely to wear their seat belt and get their blood pressure checked.

Perhaps it’s no surprise that this prudence extends to their investments. Surveys have found that women are eager to avoid large losses and are less inclined to act on incomplete information.

This risk aversion is partly due to emotional differences. Men tend to display anger in the face of negative events, while generally women are more likely to feel fearful. This ‘lens of fear’ contributes to feelings of uncertainty, and it may lead female investors to be more conservative.

2. Women are less confident about their finances

Men are often self-directed learners and like to do their own research. Women, on the other hand, tend to prefer a more social learning experience, but they don’t always get a social element when it comes to personal finance.

Talking about money is still considered taboo. One survey found that 65% of women were less likely to talk about finances with friends and family than other sensitive topics such as health or work issues.

Additionally, the financial services industry is still run by mostly men, which can make investing feel less inclusive.

Ultimately, both overconfidence and underconfidence can hurt investors. Taking too much risk can lead to needless losses, but total risk avoidance can result in missed opportunities.

3. Women are less likely to own stocks

Women keep a full 71% of their assets in cash, whereas men hold 60% in cash, according to a survey by BlackRock.

Women already face unique obstacles in wealth accumulation such as the gender wage gap, less financial education (see above), and more lengthy and frequent career breaks to care for children or aging parents. A hesitancy to invest can make the situation worse.

A lack of an appropriate investment strategy can be devastating. Per one projection by Ellevest, over the course of a 35-year career, the cost of the investing gap between men and women can add up to a staggering $1 million depending on salary and market performance.

4. Women are underrepresented as portfolio managers

Men gained 85% to 90% of net new portfolio management roles from 1990 through the end of September 2017, according to a Morningstar study. Today, the ratio of men to women mutual fund portfolio managers sits at nine to one.

Diversity can benefit any work setting, and the asset management industry is no exception. Investment firms are increasingly starting programs to promote gender diversity and tackle unconscious biases.

5. When women do invest, they tend to perform better

Several studies have statistically shown that female investors often outperform their male peers.

The average male investor tends to be more confident and trade more often, whereas women are more likely to buy and hold. So that even when women make dubious selling decisions, they do it less frequently, minimizing the negative effects.

Women often stay focused on their long-term goals (retirement, funding college education, etc.) rather than a benchmark, and stick to a plan.

Nearly 90% of women will be solely in charge of their own finances at some point in life—and that number will only go up as women delay marriage, divorce more, and often outlive their spouses. It is vital for men and women alike to be fully aware and in control of their investments.

What Should every Woman Know About Investing?

Many women may think they lack the knowledge and insight necessary to grow their money with investments. But various reports, including one found in The Forum for Sustainable and Responsible Investment’s “Investing to Advance Women” guide, consistently confirm that women outperform men by a considerable margin when it comes to investing.

To that point, a recent STEMconnector report found that women earn 12% higher returns than men when it came to individual investments.

So what’s different about the way a woman invests? Regarding banking and investing, in general women don’t approach decision-making the same way men do.

In order for women to cash in on investing opportunities, here are some key things that every woman should know:

1. Understand compound interest and time value of money. The earlier you invest, the more wealth you can accumulate. That’s because compound interest allows you to earn interest on your interest. It isn’t as confusing as it sounds.

When you invest, the initial amount you deposit is called the principal. If your principal is $100 and you earn a 2% return, you’d gain $2. Combining your principal and the interest brings your balance to $102. Now you can earn interest on $102 instead of just on your $100 principal. Over 10 years, you’d end up with $121.90.

That doesn’t sound like much until you consider it on a larger scale. Let’s increase the investment to $1,000 and plan to add $1,000 to the account every year. Considering the average stock market return is 7%, your money will grow to $108,685.30 after 30 years.

In this scenario, you made more than $77,000 thanks to the power of compound interest and the time value of money.

2. It’s important to commit to your investment strategy. Personalizing your portfolio and developing a strategy to suit your situation is an important factor. Taking into account your personal goals, objectives, temperament, tax bracket and the time you can commit to managing it can help you find balance in your portfolio.

However, keep in mind that everyone — not just women — can get attached to their money. With investment prices in a constant state of flux, drops in the value of your portfolio is normal. In times like this, it’s important not to panic.

As long as your investing is done intelligently, you’ll be fine. You can lose a lot of money if you sell off your assets for the wrong reason.

3. It also makes sense to seek the help of a financial professional. You might feel it’s unnecessary to pay someone for something you think you can do yourself. After all, you’ve been managing your money for a long time, right?

Well, think about this: Do you call a plumber when you have a flood in your basement, or an electrician when your lights go out? Of course you do. Because you rely on their expertise and experience, so why not use a financial pro to help manage your money?

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A financial professional can help guide you to make more informed financial decisions.

Whether your focus is retirement or growing wealth for financial security, investing can help you get there. Do some research and trust your instincts.

When it comes to investing, it’s clear that women are doing something right.

Finally

It is really only in the past century or so that women have successfully broken down many of the barriers in a male-dominated world. The role to which women have been relegated has constrained both their financial knowledge and activities. This situation is changing constantly.

Nonetheless, some of the clichés remain entrenched in the mind and some elements of the old role inevitably have stayed intact. In any event, understanding gender differences and how they are changing over time is fundamental to understanding and managing the world of investments.