October 1, 2023

August 24, 2022
Do women make better investors when market volatility strikes?
In this article, we will explore that question and use data to show that if you want to make it through a bear market with minimal stress, you should invest like a woman. Yes, research shows women are often less confident in discussing their finances, and only one-third of women would classify themselves as an investor according to Fidelity’s 2021 Women and Investing Study. But when it comes to managing their money and investments, women exemplify much stronger behavioral controls, as evidenced in countless studies. Let’s dive in.
Opportunities And Obstacles
According to the BMO Wealth Institute, in 2015 women controlled $14 trillion of the personal wealth in the United States. In 2022, Wells Fargo found that 44 percent of ultra-high-net-worth investors in the United States are women, and 41 percent of women are the primary breadwinners in their households. If we look outside of the industry at education-based studies done by the Pew Research Center, of those currently pursuing college degrees 55 percent are women. However, women hold only 24 percent of leadership roles within the financial services industry, a number that has slowly increased in recent years and is projected to grow to 28 percent by 2030 (Deloitte Insights).
Skill And Behavior
Beyond the established spending and wealth-building abilities of women in our country, there are key behavioral trends across female investors that should be emulated by all investors. Women trade 23 percent less frequently than men, but, on average, women outperform men by 1.3 percent more during bear markets (Openfolio). A Wells Fargo study found that women exhibit several important strengths related to investment success including discipline, willingness to learn, and risk-taking. In a nutshell, women tend to exhibit more self-control in their spending and have a more disciplined approach to investing, while men are more likely to invest based on gut instinct, and therefore make less rational decisions when it comes to managing their assets.
The Confidence Gap
Despite the data above, just 9 percent of people surveyed expect women to outperform men in investment management (Fidelity). Unsurprisingly, this lack of self-assurance has led to a confidence gap between men and women when it comes to money. Only 47 percent of women are confident talking about their investments with a professional and only 42 percent feel confident in their ability to save for the long term, including retirement. Even though nine out of ten female investors say that gender doesn’t matter when selecting an advisor, those who work with female advisors exhibit greater confidence and higher satisfaction on average (State Street Global Advisors’ Women and Investing Omnibus Survey, April 2015).
What Women Want
Though in recent years the confidence gap is narrowing, women continue to have a lot of ground to make up for. According to Fidelity, in the next 12 months, nine out of ten women plan to take additional steps to learn more about financial planning and how to make their money grow, including contacting a financial advisor. Wells Fargo reported that twice as many women as men endorse wanting to receive an education from a financial advisor.
Changing Our System And Ourselves
To solve this great misconception, the facts cited above need to inspire action. We must not only empower the investing capabilities of all women by providing educational resources, but we must also encourage women to enter the industry as financial planners and advisors, to offer a larger network of women that can inspire confidence in others when it comes to money matters. While we can learn an abundance of valuable information from statistics and data, understanding the broader tendencies of a group without considering the unique experience of everyone in it would be another misstep. All women and all men are not the same, but we stand to gain an infinite amount by learning from each other.
Dr. Daniel Crosby is chief behavioral officer at Orion Advisor Solutions. Lara Coviello, CFA, is senior portfolio manager at Brinker Capital Investments.
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