Women Are Better Investors Than Men, And More Risk Averse

Numerous reports, studies and surveys conclude that in the investing battle of the sexes, women outperform men. However, there’s a caveat for advisors to be aware of. Women are more averse to risk than men.

That jibes with other research finding that men have more of a “gambler’s spirit”, are more given to impulse and more likely to carry debt than women. Add to that, women are better savers than men. Indeed, women are increasingly educated – they make up a sizable majority of current college students in the U.S. – are making more money and are actively financial advice. Those are all positive points for advisors. There’s more and it comes in the form of how women are handling their personal finances.

Put it all together, and it’s clear that advisors should be making efforts to engage more female clients and that these prospects may have the leeway to take on more risk in their portfolios.  Women and investing is one of the foundations of Nancy Tengler’s The Women’s Guide to Successful Investing  was originally published in 2014 and has recently been refreshed.

It’s worth a read by advisors because it explores women outperforming men when it comes to investing though the former often view themselves more as savers than investors.

Advisors Take Heed of Women’s Investing Proficiency

With life expectancies increasing and the possibility of many women living well into their 90s, advisors should help female clients get on the ball when it comes to investing and embracing risk. There are other good reasons advisors need to get involved on these fronts.

“It is no secret that women are increasingly controlling wealth. Estimates suggest that women control more than 50% of all wealth and growing. Importantly, 95% of women will be their family’s primary financial decision maker at some point in their lives,” according a synopsis of Tengler’s book. “Yet recent studies show that Millennial women are deferring financial and investing decisions at a greater pace than Baby Boomer women. Targeted to all women with a clear recognition that though the objectives and needs of this vast segment may not necessarily be homogeneous, women share common challenges when it comes to investing, this book provides clear instruction and a series of Intelligent Investing Rules for women to live by, especially in these times with sticky and persistent inflation and rising interest rates.”

As Tengler told Lorie Konish of CNBC, some of the other factors that help women outperform men in the investing realm are women being more open-minded, more committed to research and less reliant on beating a benchmark.

All positive points to be sure and factors advisors should embrace. So what’s are the big issues keeping women from reaping more investment rewards?

Helping Women Overcome Nerves

Arguably, the biggest factors confounding women when investing boil down to nerves, including keeping too much capital in cash and persistent feelings that they need more education to get in the game.

Obviously, the latter point is something advisors can help with right off the bat. When it comes to the matter of not deploying enough capital to assets with appreciation potential, math proves why cash needs to be put to work, not sit on the sidelines.

“Having just 5% of an investment portfolio in cash rather than in equities will lower annual total return by 0.30%, according to Tengler. Over a 20-year period, that may result in $30,000 less in growth for a portfolio that started with $100,000, assuming a 9% annual average stock return, reports CNBC.

Related: These Women Likely Need Financial Advisors