Anything you can invest, they can invest better and science backs this up. According to a recent study, women are better investors than men. Guys, take notes here. If you want to invest like Warren Buffet, you may want to invest like a girl because he does. Read on for the secret to why women are better investors than men.
The world of finance is thought to be a man’s world: Cigars. Receding hairlines. Tall men sipping champagne and making business deals in steam rooms or golf courses (isn’t that where the big deals happen?).
Luckily for all of us, that reality has been changing over time. Now, more and more women are in positions of power. In fact, women now control more than half of all U.S. wealth—and that number will only grow in the coming years.1
But the biggest shake up to the male-dominated investing world, is that according to a recent study, women are outpacing men with their investments.
The way women tend to approach investing is healthier and calmer, and it’s the way we should all approach investing.
– LouAnn Lofton, author of Warren Buffett Invests Like a Girl–And Why You Should, Too.
8 Million Investing Accounts Don’t Lie
According to new data from Fidelity Investments, women on average are actually better investors. The study states: “In sifting through more than 8 million investment accounts, Fidelity discovered that women not only save more than men (0.4 percent) but their investments earn more annually (also 0.4 percent).” 2
While men save an average of 7.9% of their income in their 401(k) or IRA accounts, women average 8.3%.
You may say that doesn’t sound like much of a difference.
Oh, but over time it is.
As the article states, “for a 22-year-old starting out with a salary of $50,000 a year, a woman investor will outpace her male counterpart by more than $250,000.”
Yep, that’s a quarter of a million dollars.
60,000 Accounts Don’t Lie Either
In a review of 60,000 accounts, robo-advisor Betterment found that female investors signed into their accounts 45% less frequently than men and changed their allocations 20% less frequently than them as well.3
So, what is it that women are doing better than men?
5 Reasons Why Women Are Better Investors Than Men:
1.) They take on less risk. They’re not loading up entirely on equities.
2.) They save on trading fees (men are 35 percent more likely to make trades).
3.) They invest more in vehicles like target-date funds, whose automatic allocations make for diversification.
4.) They save more in workplace 401(k)s and individual vehicles such as IRAs and brokerage accounts (almost a full percentage point annually).
5.) They are more patient than men.
This style of saving and investing, over time, adds up. Just ask Warren Buffet or John Bogle.
How to Invest Like a Girl
So the lessons here are clear. Create a diversified mix of investments – preferably global in nature – that you avoid trading or changing a lot and rebalance regularly to match your age and risk profile over time. Oh, and save more, too.
One such example of this is found in the MarketFlex Portfolios offered by Clear View Wealth Advisors. While each portfolio is slightly different depending on the age, tax planning and income needs of each investor, they contain the same building blocks. Each is anchored by passive index mutual funds or Exchange Traded Funds (ETFs) that cost a fraction of actively-traded mutual funds (0.25% or less for ETFs versus 1.25% for the average mutual fund). The funds tend to tilt toward “value-oriented” types of investments which sport lower volatility and tend to pay dividends, the other factor that contributes to an investment’s overall total return. And aside from some occasional pruning and balancing or small allocations to compelling active or tactical investment managers, the focus is on patiently waiting to harvest gains or income just like a good farmer does with his crops.
Male or female, here are a few suggestions:
Save more, save more, save more.
Nothing will make as big a difference in your retirement account balance as the amount you save. Whether you’re a man or a woman reading this, the takeaway is the same — by saving as much as you can in a diversified range of investments that are suited to your goals, risk factor, and timeline, you can help put the odds in your favor.
Lastly, it also goes to show that you don’t need to be a balding man sipping champagne in a steam room to get ahead. Which is good news for everyone.