Markets & Economy

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. (1)

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. (2)

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. (3) 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. (4)

5. When women do invest, they tend to perform better. Several studies have statistically shown that female investors often outperform their male peers. (5,6)

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. (5)

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.