The Increasing Success of Women as Investors
More and more we hear the same stories of women living longer, being sicker and with less money to work with into retirement. Women are 80% more likely to be impoverished in late life.[i] We know why this happens: women live longer than men, women often make less and save less, and women often aren’t in control of their investments. The harsh truth is that women need a bigger nest egg than men because they will most likely live longer and need more extended and expensive care. Instead of another article focusing on the grim details of women and retirement, let us change gears and talk more about women and investing. How can a new generation of soon to be retiring women break the cycle and come out on top? In this article, we will explore qualities that may make women better investors and hopefully encourage more women to take the plunge into investing for their retirement.
For starters, when push comes to shove, women show themselves to be better investors than men. Women tend to buy and hold and trade less often when investing in the stock market. This habit tends to fare better in the long-term investment game. Trading less often means incurring fewer fees and penalties. Big picture retirement savings often means restraint, not reacting impulsively as the market rises and falls. And a huge study, of more than 8 million investment accounts done by Fidelity revealed that women not only saved more, their investments also earned more annually.[ii]
Like the old joke about men refusing to stop for directions, women are also more likely to ask for help or seek outside counsel for expert advice. Building relationships with trusted experts in a field, specifically a financial advisor, can help reach long-term goals and build confidence and knowledge along the way. Social connections, including friendships, are also one of the reason’s that women live longer.
Finding companies to invest in that have more meaning than merely their stock performances may be another way that women can excel in investing. Seeking out companies with philosophies that align with your values can elevate your investing experience from merely something that makes money to something that makes the world better. Ethical companies often practice hiring diversity in their business model and that promote environmental sustainability and humane working conditions and wages. Ethical investment is not just bringing a touchy-feely element to investing, but instead shows a forward-thinking sensibility that also has shown to be profitable. In fact, the 100 most ethical companies consistently outperform industry competitors by 1-4% in 2016.[iii] Companies who have women CEO’s or board members outperformed (25% annualized return) vs. the more traditional male-dominated businesses (at 11%).[iv]
As more women graduate with Bachelor’s degrees and advanced degrees and more women work outside of the home, the playing field will change as far as what type of retirement saving and investments they are bringing to their retirement. As more women approach retirement single or divorced, the onus will be on them to manage their retirement. The good thing here is that women tend to not be as impulsive across the board and will instead seek to educate themselves before making any major decisions. For example, women are more likely to take time off to care for the family at periods in their working life, because of this loss of savings and income, they tend to devote a larger chunk of their portfolios to growth-oriented equities. This can result in a higher return on investments even if they were working with less to start. Doing research and finding good counsel on how best to reach their goals will be one of the best choices a woman planning for retirement can do.
Being Able to Take Risks
The old adage no risk, no reward, is only true to a fault. Too much risk and you could lose your investments or get zinged with fees and penalties. Being too reactionary to the ups and downs of the market could really jeopardize long-term goals. Smart investing for the long game of retirement involves just the right amount of risk for the best reward. Shrewd choices, patience, and the ability to take some smart risks may just be the right formula for a successful women investor.
As we talked about above, a lot of women never managed their retirement savings or got into the savings game too late, either can put them at a real disadvantage as the person most likely to outlive their spouse and have to stretch that money further than it can go. Moving forward women investors need to see the qualities that had often been viewed as disadvantages, being shrewd, being emotional, being low-risk, to actually be advantages for long-term savings, especially when that investor is knowledgeable and has a firm plan to stick with. It is vitally important that more women join in the investment community and take control of their retirements and on their terms.
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Carolina Retirement Planners, LLC. are not affiliated companies. Investing involves risk, including the potential loss of principal. 727659