Women make great investors, so what’s holding them back?

Every March in the US is designated Women’s History Month by presidential proclamation. It’s set aside to honour women’s contributions in American history.

Fidelity Investments, a large US financial services company, releases an annual study at the start of Women’s History Month.

This always offers some fascinating insights and the 2024 edition was no different.

It found that financial stress levels were consistently high among women, no matter their total household income.

However, it also found that taking action made the biggest difference in reducing this, with women who made financial moves in the past six months indicating less stress than those who haven’t.

Still, survey respondents admitted there were several things holding them back from starting to invest, or from investing more.

Almost a third feared losing all their money, while a quarter weren’t confident in their ability to invest and another quarter didn’t know how.

It’s unfortunate so many women are apprehensive when it comes to investing, because there’s plenty of evidence to suggest they’re better at it than their male counterparts.

Another report from Fidelity a few years ago analysed the investing behaviour of 5.2 million retail customers over the past 10 years and found women outperformed men by 0.4 per cent a year.

That might not sound like much, but in the world of investment returns it’s a sizeable gap.

If you don’t believe Fidelity, there’s the Wells Fargo Advisors report from 2016. It found that women not only performed better but their returns showed much less variability.

There’s also extensive research from Barber and Odean (which put the outperformance of women at closer to one per cent annually) as well as studies over the years from Merrill Lynch, OpenPortfolio and more.

These have all drawn very similar conclusions.

Women are more likely to follow tried and tested investing principles, while men often think they know better.

Studies also show women trade a lot less, are more willing to stick to a long-term plan and are more open to seeking advice.

In contrast, men tend to overestimate their abilities, while they believe their more frequent trading will make them money (more often than not, all it does is cost them more in fees).

Women are less likely to hold a losing position too long, while men will often persevere, insisting the market doesn’t understand and that one day they will be proved right.

They don’t tend to jump on bandwagons without doing adequate research, nor do they hold such concentrated portfolios.

One study (from Betterment) found men were six times more likely to make big asset allocation shifts, such as moving from all shares to all bonds, or vice-versa.

Unless your long-term goals and objectives have changed, dramatic moves like that are unwise and they rarely pay off.

Women don’t have the monopoly on all these attributes, and there are plenty of sensible, level-headed male investors too.

Our firm has more than 180 investment advisers across New Zealand. All of them are talented, hardworking and knowledgeable, including the 50 that also happen to be women.

This team have been running Women’s Wealth events with great success for more than 15 years.

At any given time there’s likely to be one happening near you, while there is a wealth of resources online from a range of providers, for prospective investors of all genders.

Women have the demeanour and temperament to be very successful investors.

For those hesitant to take more control of their finances, my advice would be to educate yourself and take action.

The statistics suggest you’re likely to succeed.