Surely more than once you have had to hear statements like:
“The investment world is primarily male.”
“Women invest less than men”.
“Men take more risks when it comes to investing.”
How true are these claims?
Various surveys confirm what I feared: yes, women invest less than men and the main cause of this phenomenon is income inequality.
A survey conducted by BlackRock revealed that of all the wealth managed by women, 71% is in their checking accounts and only 29% is invested. For their part, men invest 40% of their assets.
Furthermore, women not only invest less, but also start investing later. According to Forbes, only half of millennial women have started investing, compared to 61% of men.
And I add more data. In a Morningstar study, men reported that they invested more frequently, were more confident in their investing knowledge, were more likely to have made changes to their portfolios in the past 12 months, and were more likely to consider themselves investors.
With this, at first glance, it’s easy to realize that men and women seem to have very different financial behaviors.
However, these results can be misleading. In the Morningstar sample, women had, on average, 20% less income than men. When they compared men and women with the same income level, the differences in spending and investment behavior were no longer significant.
Twist: Perhaps women are better investors
Investigating more on the subject, I came across a study on women and investments, carried out by the American company Fidelity Investments (2021). This study aimed to collect insights women’s attitudes and behaviors in managing their finances and, in particular, when investing.
I share some results that I found interesting:
- Currently, 67% of women invest outside of retirement. In 2018 it was 44%.
- 50% of women say they are more interested in investing after the pandemic.
- 1 in 5 women report investing in new asset classes for the first time in the last year.
- 9 out of 10 women have a clear plan of action so that, over the next 12 months, their money will work harder to grow.
But in my view, the most surprising finding is this: Over a ten-year period, female Fidelity clients earned an average of 0.4 percentage points more annually than their male peers.
That may not sound like much, but within a few decades, thanks to the famous compound interest, women could become so much more.
Why have women consistently had better returns on investments than men? The answer is simple: during those 10 years, women carried out half as many transactions as men.
With this, it’s impossible not to wonder why men buy and sell so much. Barber and Odean attribute this to excessive self-confidence. And where does this overconfidence come from? The New York Times quotes neurosurgeon William J. Bernstein to explain it. He brings a biological component to the table: testosterone. This hormone increases ambition, reduces fear and contributes to overconfidence.
The paradox: despite having better results, only 1/3 of women consider themselves “investors”
Ironically, the Fidelity study found that despite better results, women are less likely to consider themselves investors and reported being less confident in their investment knowledge.
In this sense, only 42% feel confident in their long-term saving skills, 33% feel confident in their financial abilities and only 14% of women say they know a lot about saving and investing.
Here is a clear path to move forward on. The findings of the study, in my view, suggest that, when it comes to investing, women feel we have a more learning path. But, in addition, the feeling of great investors is less likely to lead us to make mistakes based on overconfidence.
Why is this important?
The data helps us put the issue into perspective and understand that there is a lot to be done in terms of financial education among women.
Achieving this goal is essential if we consider that, at present, a retired man has assets up to 3 times higher than us.
And that we live longer, retire earlier, have more gaps and are still dealing with the wage gap.
The fact that women invest helps us to successfully close the “gender gap” because, as the data shows, we have the ability to invest with discipline and looking for the long term. Very important!
There are things we can’t change that easily, but it’s imperative that more women understand the importance of saving and investing in achieving financial freedom.
BONUS: What happens in the Coopeuch DVA Funds?
Writing this column, I got curious: how many investors are in Coopeuch DVA Funds? I leave you some information to bring the topic to our country.
34% of investors are women, versus 66% men.
- Although there are fewer female clients, the average amount invested by them is higher than the average amount invested by men.