Do you find yourself deferring to men when it comes to planning your financial future? If you answered “yes” to that question, you’re not alone. A recent study by MassMutual found that only 26 percent of women are confident making their own financial decisions.
I think it may come from the same cultural conditioning that tells us girls aren’t good at math or science. Both ideas are complete rubbish. Studies show that when making financial decisions, women perform just as well — if not better — than men. After all, women make a large proportion of household daily budgeting, spending, and purchasing decisions.
In fact, recent findings from Merrill Lynch, Barclays Capital, and Ledbury Research demonstrate that women produced slightly higher returns than men in individually constructed portfolios.
Do you want to take a more active role in shaping your financial future? Consider these points to build your confidence when it comes to making investment decisions.
1. Women focus more on end goals, as opposed to short-term gains.
Many studies show that women take fewer uncompensated risks as compared to men. Also, women are less likely to overestimate their competence, and so are better able to discount hype when it comes to investing.
2. Women buy and hold, a sound investment strategy.
Buying and holding is an extremely sound approach to investing. Of course, that doesn’t mean it’s the best strategy in every situation. Investing is a science, and it’s critical to consider what you’re buying and holding and in what proportions, so find good advice when determining your portfolio.
3. The financial media is not your friend.
Remember, most financial reporters don’t have any formal financial education. Many so-called investment news segments depend on sensationalism and fear tactics to generate ratings.
4. Risk can be your friend.
Don’t view risk as something to be avoided. Rather, consider your individual goals, your current financial standing, your age, and your time horizon, among other factors — and only then choose vehicles that will provide the appropriate level of returns.
When it comes to investing, the question shouldn’t be, “Is there a risk?” but rather, “What is the appropriate level of risk for the returns I am seeking?”
5. Your investment strategy is only as good as your information.
When it comes to investing, the devil is definitely in the details. There are a host of barriers that can keep you from getting the quality information you need to make sound decisions.
Financial advisors, like me, are prohibited from offering more than generalities when it comes to advising non-clients. This makes it nearly impossible to offer actionable advice to the public at large. Always filter your information through an assessment of quality of source.
6. The most successful investors have a team.
Even Warren Buffett has advisors.The DALBAR study of average investors reveals that most “lone-wolf” investors earn significantly lower returns than benchmark indexes, which is the gauge for investor success.
A good, fiduciary investment advisor (or “fee only” advisor) can provide returns that compound over time, far outpacing any fees you’ll pay for the advice. As distinct from a “fee-based advisor,” a fiduciary advisor is obligated to put her clients’ interests first — even before her own interests.
The next time you doubt your ability to make investment decisions, remember, no one cares more about your future than you do!
Hilary Hendershott is a fiduciary, fee-only financial advisor for women.
Hilary Hendershott is a member of the DailyWorth Connect program. Read more about the program here.