There are many areas in life where women outperform men, so why not investing? At first glance, investing can seem like a “man’s world” as most professional investors are male. According to Investopedia, only 14 percent of professional investors were female in 2013. Just 23% of Certified Financial Planners are women. Yet over the past decade, millions of women have jumped into investing for retirement.
Over the past several years, numerous studies have suggested women tend to outperform their male counterparts. A recent study from Fidelity Investments*, which includes analysis of more than 8 million clients, – showed that women tend to outperform men by nearly half a percent annually. A separate study by the Warwick business school in the UK had women beating men by 1.8%.
Why have women been so successful in this field, and what can men learn from them? According to the Fidelity study, Women had better skills and strengths in planning, Risk Management, and furthering their financial education.
Women tend to be better planners than men. Women usually have a stronger ability to create processes and follow through with the plans that they create. Investing is much more than simply picking good stocks. Investing is a process, which includes making sure one measures opportunities against their initial plan and having the fortitude to stick with it when times are tough.
Women have been known to be more risk-averse than men, which helps them stick to their initial plans and, again – not panic when times are tough. Fidelity’s analysis found that women are less likely than men to succumb to the seduction of market trends and emotional reactions. Investopedia’s Investing for Women course states: “Men are more susceptible to being driven by their emotions when it comes to investing. Investing is not like sports or gambling; there aren’t big thrills, just steady rewards over time. Investing requires patience and discipline.”
Men tend to be more overconfident in their investing skills, leading them to believe that they do not require further education. Investing is a fluid process where one must be willing to evolve. Fidelity found that women are 2.5x more likely to attend investment education classes than men. They are also significantly more likely to have read a financial book during the past 12 months (44% vs. 23%). Investing is not just about making good choices today; it is also about planning and adapting as needed for tomorrow.
The Fidelity report highlights and underscores that financial independence shouldn’t be something you pursue without some overarching policy or structure. There are just too many distractions and competing demands for our mental and emotional resources in day-to-day life. Investing requires patience, commitment, and the ability to learn new skills and address potential blind spots.
Gardner Sherrill, CFP®, MBA, is a CERTIFIED FINANCIAL PLANNERTM professional with Sherrill Wealth Management. To learn more, visit sherrillwealth.com, a Bradenton wealth management firm specialized on living in retirement.
This information is not intended to be a substitute for specific individualized tax or legal advice. Individual circumstances will vary. Please see your tax professional regarding your specific situation.
The opinions expressed in this material are not intended to provide specific advice or recommendations for any individual.
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