Thanks for Investing, Mom: Women are Successful Investors
May 14, 2018
Women have often been the chief investment officers (CIOs) in their family. Today, more than ever, as they manage significant portions of their household finances, they are also playing an active role in investment decisions. A study by Allianz Life Insurance Company of North America found that 53 percent of women report they either have a “great deal of responsibility” or they “do it all,” when managing the household’s long-term savings and investments. As more women outlive men and inherit wealth from husbands or parents, they increasingly embrace this responsibility.
Although some argue that women might be less confident managing investments than men, does that mean they are less successful investors? A common stereotype is that they do not participate or save as aggressively for retirement because they are more cautious. But studies show that what might look like caution to some, breaks down into thoughtful, purposeful and successful investing over time. A growing body of research also indicates that women are just as successful investors, if not more so, than their male counterparts.
In honor of Mother’s Day, here are some reasons why women are often more savvy, successful investors.
Focusing on long-term goals
Women often view money as a source of ultimate security and therefore, tend to focus on specific, long-term goals. They then easily align their financial goals with their overall life goals, such as buying property or obtaining financial independence. Their long-time horizon also helps them be patient and disciplined investors. According to Abigail Sussman, associate professor at The University of Chicago Booth School of Business, men trade 45 percent more than women, and speaking generally, the short-term nature of that higher trading led to lower long-term returns.
Carefully examining investment strategies
Women investors also have a record of thoroughly examining their investment strategies and choices. In her book, “Warren Buffett Invests Like a Girl: And Why You Should, Too,” author LouAnn Lofton determined that women spend more time researching their investments. They don’t make rash decisions or invest hastily, they diligently ponder such matters and then make an informed decision.
Women are also more likely to seek out information that challenges their assumptions. Michael Liersch, former head of Behavioral Finance at Merrill Lynch Wealth Management, found that while women ask more questions, it is part of their research to make sure they understand the purpose of a strategy and how it will help them reach their goals. Both researchers concluded women may obtain a deeper understanding of their investments which helps them stay disciplined investors through difficult market environments.
Seeking professional advice
Finally, women investors are more likely to seek out a professional advisor and listen to their advice. A number of studies report that women investors feel they have less confidence in their knowledge than their male counterparts. They are, however, much more likely to overcome their concerns by seeking out experienced advice. According to Prudential’s Financial Experience & Behaviors Among Women study, women tend to identify themselves as collaborators, with 44 percent saying they usually rely on some input from a professional advisor but make their own decisions. The old stereotype that women are more willing to ask for directions may be true when it comes to investing, and that can also help increase the odds of long-term success.
The Federal Reserve estimates that women will control over two-thirds of the wealth in the U.S. by 2020. At Summit Place, we work with many such women today. Some of them are part of an engaged couple actively partnering with us to ensure their financial future. Others are single women, confident in the personal approach we build together. There is no doubt that more and more women are finding their uniquely personal financial confidence. We celebrate each of them and encourage them to pass on all they have learned to the next generation of future moms, CIOs, CEOs and world leaders!