Women Are Better Investors Than Men

So why don’t we realize it?

Women are actually better investors than men – we just don’t realize it yet, a new study found.

The study, by Fidelity Investments, found that women earn higher returns on their investments than their male counterparts by about 0.4 percent. This number may seem small at first glance, but can have a “significant impact” over time, the study says.

Yet only nine percent of women expected that they would outperform men.

“It was shocking,” says Alexandra Taussig, senior vice president of women investors at Fidelity. “Women need to lean in and own the fact that they’re better investors and celebrate that. As we would say, ditch the doubt.”

There are a few reasons why women investors tend to outperform men. In general, women take a more hands-off approach to investing, which allows their funds to gain a better return over time.

They’re also more cautious: Statistics show that men trade their stocks 45 percent more than women do. These differences are so well-documented that there’s even a book titled Warren Buffett Invests Like A Girl: And Why You Should, Too.

Taussig says that in her experience, women view money as a tool that they can use to accomplish their goals, while men tend to view investment as a game to be won.

“Men have a less long-term view and less patience. They… look at investing as a competition to see [if they are] beating the benchmarks,” she says. “Women evaluate success by saying, ‘Am I on track to achieve my goals?’”

Although it’s great news that women are successful investors, they still have a long way to go to be on equal footing with men financially, Taussig notes. Important steps include breaking down the stigma of women talking about money, building confidence when it comes to financial decisions, and increasing access to resources that address women’s specific concerns about money.

“Money has been a taboo topic. Women are more comfortable talking about health than money,” she claims. “When we open it up and start talking in a human way, the shackles fall off, and the questions just start coming.”

Fidelity has a site aimed specifically at women investors, and other financial outlets like Ellevest and DailyWorth’s sister company, WorthFM, are on the rise. It’s clear that more women are engaging with financial services, a sector that has typically been dominated by men.

But just as women may need to change their perspectives on money, the financial industry needs to change how it engages women investors, as well.

“Financial services has not done a good job of embracing and welcoming women,” Taussig says. “The financial services industry was created by men for men.” (The controversy surrounding Wall Street’s Fearless Girl underscores this sentiment.)

Women should think of themselves as investors, Taussig advises. Don’t feel like one? Anyone with a 401(k) or other retirement plan is an investor and should embrace that role. It’s also time to ditch the myth that you need to do everything right in order to get a return on your investments.

“Women try to be perfect, but you don’t have to be perfect,” she points out. “You just have to do more right things than wrong things over the course of your life.”

Taussig doesn’t shy away from sharing her own financial mistakes: “I bounced a check to the minister when we got married,” she says with a laugh. She’s also borrowed from her 401(k) and had a large amount of credit card debt.

Although many women think mistakes like these will entirely derail their finances, most of the time, that’s not the case. “A lot of women are doing a lot of things right. We need to take credit for that,” she says.

It’s also time to change the narrative around women and money, she says. Alarmingly, Fidelity found that only 25 percent of women say that they are a primary decision maker (which includes being a decision maker alongside your partner) in their households.

It’s a cycle: women are intimidated by finances because they don’t feel in control. That intimidation keeps them from becoming more engaged and building confidence, which in turn keeps them from engaging wisely.

“Women have half the confidence and twice the stress when it comes to money,” Taussig says.

But by educating themselves and taking small positive financial steps, we can change that.

“What we are trying to do systematically is introduce a new cycle,” she says. This cycle of empowerment includes encouraging women to talk about finances, engage with financial education, and to act, even it’s just by doing something small like increasing their retirement contributions by one percent.

By taking a small step every three to six months, people can drastically change their finances, she advises.

“That’s where you start to build muscle memory and confidence in order to break this lack of confidence and stress dynamic that we’re in now.”

Join the Discussion

One Response to “Women Are Better Investors Than Men”

  1. Lisa Hastings

    I think a better way to get women to be more confident investing is to encourage them to start with the obvious things, and guide them to free investment advice that is meant for all people, not just for women. I’ll looked at several of the “women-oriented’ sites, and often they are more condescending to women than they are helpful. It’s not that men are born knowing how to do things; there are plenty of places—discount brokerage houses, websites like bankrate.com and such that provide lots of information. I think most “women” sites mostly perpetuate the myth that women need to have someone to tell them what to do and hold their hand, which I think is counterproductive.

    My simple advice would be for every adult who is has an income of any size to open checking and either MM or online savings accounts in their name only. If the employer matches a 401k, contribute up to the match amount. Depending on income, open either a Roth or Traditional IRA and plan to contribute the maximum or at least as much money as possible every year. (People can have money taken automatically from paychecks just like 401ks and pensions do, or auto from their checking accounts for the basic amount. Then, make a commitment to adding any “extra” money—bonus or part of it depending on how much of your income it is, and money from tax returns, and even money from cash back credit cards—in order, to build up your emergency fund, to fund your IRA to it’s maximum if you can’t do so with regular cash flow, then split in whatever % you are comfortable with between a discount brokerage account and online savings to hold money to have on hand when there is a good investing opportunity (separate from your emergency fund and savings you build up because you know you need to make a large purchase). Take the time to research different discount brokerages to find the one that fits your needs best. Some require more money to open an account than others. Some offer more choices. Etc.

    I suggest that individuals also open a no fee credit card as soon as they can in life, and use it, paying off entire statement balances every month, only as much as needed to build up a good credit score. Maintain the same fee free card forever, even if you add others to it later. It will give you a history of financial activity that can help throughout your life. If you don’t have good self control, keep it in a safe place at home and only take it when you are planning an expense. Like dinner with friends once a month. Use it, pay it, but don’t abuse it.

    People shouldn’t feel pressured into only buying funds or only buying equities, or to put more money in the market than they can afford to lose. Because some funds require thousands of dollars to open, many people (male and female) assume you need thousands of dollars to open a brokerage account or that they have to buy at least 100 shares of stock at a time. Neither is true.
    I think a better way to help people build confidence is to encourage them to buy a small amount of stocks or a no or low minimum fund at first and add to it over time. Also buy some bonds, even if you are young, for diversity and safety. Advice as simple as starting with relatively safe large cap dividend stocks and having them set to reinvest the dividends is a good way to start….That doesn’t take a whole course to do.

    Once people get married, I would encourage both parties to keep some money and investments in their own name and under their sole control. Not only is it a way to build experience investing, but it makes it so much easier if a break up or death occurs….and it also helps you maintain your own credit score, which can really help out whether you are married or single.