As a financial professional, I have experienced, and continue to observe, a bias against women as successful investors – a bias that is unfounded in the real-life decisions made by women as they address their financial goals. Despite the career advances women have made in all dimensions of our society, the perception persists that women are reluctant to address meaningful financial planning and investment decisions due to a lack of understanding of the basic concepts of money and finance.
Recent data suggest that women exhibit certain traits that make them not only competent investors but excellent investors. Here is why:
- Women typically trade less. Per Vanguard research, only 4% of women traded in their accounts, compared to 8% of men in 2019. Surprisingly, even during recent market downturns, this data shows that women traded half as often as men. During periods of extreme volatility, when trading tends to spike, women continued to trade less frequently than men.
- Women’s investment choices tend to be more diversified. Vanguard research also found that women are more likely to use passive index or lifestyle funds. These choices mean their investments are often better diversified than their male colleagues. A well-diversified portfolio that reflects one’s need and ability to take on stock market risk reflects a reduced need to trade during times of market upheaval.
- Women are less digitally active. Women tend to check their accounts less than men. On average, women check their account balances half as much as their male counterparts. Specifically, women log on 11.8 fewer times than men do annually. Checking your accounts on a frequent basis – especially when markets are experiencing volatility, can lead to knee-jerk reactions of selling and buying at the worst possible time.
- Women are more likely to participate in voluntary enrollment plans. Research found that while women and men appear to have similar participation rates in their workplace savings plans, women participate 5-14% more than men in voluntary enrollment plans at nearly all income levels. When controlling for income, women also tended to save more and maintain higher balances in these accounts.
- As natural team builders, women are more likely to collaborate with their advisors. University of New South Wales Finance Professor, Peter Swan noted: “A female invasion of Wall Street might not only see far more stable markets, but also a far lower likelihood of the next global financial crisis.”
The Female Advantage
Women have natural instincts that drive intelligent investment behavior. Managing more diversified and balanced portfolios, trading less in both volume and frequency, and less digital activity leads to a disciplined and balanced approach to investing. Women should know they have the skills to make great investment decisions within their longer-term financial plans.
Liz McQueen, CRPC® is an Advisor at Soundmark Wealth Management, LLC. Liz works closely with physicians, business owners, Directors, and Executives at Amazon, Microsoft, and Boeing, and other successful and accomplished individuals to help them define their financial goals and implement an ongoing financial planning process.