Why women are better investors is due to factors like having a long term investing timeline, being risk-aware, and not trading too much. Women have much in common with Warren Buffett’s investing style!
It’s reassuring for me to learn that women can be not only good investors, but have been outperforming men’s investment returns for a while. According to a 2021 Fidelity Women & Investing study, women have outperformed men over the last 10 years by 0.4% per year or 40 basis points per year.
Recent articles and studies discuss why women tend to be better investors, and why they tend to freak out less than men over their investments and have less panic sales than men tend to have when the market tanks.
Unfortunately, not enough women are investing in spite of some of these stats and general trends.
The more that women feel confident in their ability to invest and manage their personal finances, the more that financial well-being will spread across an entire society.
The source of women’s superior investing returns comes from their lack of trading, according to the 2021 Fidelity study. Men tended to trade 50% more than women during the year.
Only 9% of women believed that they could outperform men, when the reality is that they already are outperforming men per Fidelity’s 2017 Women & Investing study.
By not trading too much and just buying and holding their investments for the long term, women can generate significant financial returns over the long term.
The number one skill that women wish they had learned earlier in life is how to invest and to make the most of their money. And 90% of women want to learn about financial planning.
One of the keys to women’s investing success is consistency, such as how on average annually women save 9% of their paychecks compared to men saving 8.6%. Women tend to contribute 12.4% to their IRAs and individual investing brokerage accounts compared to men contributing 11.6% every year. Women in general are moving in the right direction of saving and investing more.
Some women still feel held back and the need to catch up with making investments. Now 67% of women are investing outside of retirement-only accounts and that’s up from 44% in 2018.
But only a third of women see themselves as investors where 42% of them feel confident in their ability to save for the long term including retirement, 33% feel confident in their ability to make investment decisions, and only 14% of women say they know a lot about saving and investing.
Women feel confident about being their household CFO and managing their day to day budget, but they feel less confident about long term financial planning and investing.
Since the events of 2020, millennial women have especially led the financial charge where 71% of millennial women are investing outside retirement, 63% have become more interested in investing, and 54% say they now have more money to invest, per the 2021 Fidelity study.
While women in the baby boomer generation may have invested to a lesser extent compared to baby boomer men during 2020, we can still help our moms be financially secure.
64% of women would like to be more active in their finances and investing. Up to 70% of women feel like in order to invest, they need to know how to pick individual stocks and 65% of women would be more likely to invest or to invest more if they had clear steps to do so.
So if you’re looking for steps on how to pick stocks like how Warren Buffett does, I recommend the book Invested by Danielle Town and Phil Town and I have a YouTube Playlist dedicated to the Invested book.
Women tend to invest like Warren Buffett because they take a calm approach and carefully survey their investment options before they make a decision. This makes them risk-aware rather than risk-averse because they try to understand as much as possible before taking investment action.
Some articles suggest that women have been socialized to perfection and want to know everything, but when it comes to investing, one can never know everything. So women have to take a little bit more of a leap of faith, but should feel reassured that they’ve worked hard to understand an investment opportunity before committing for the long term. Investing for the long term is what women also have in common with Warren Buffett.
Women are in a great position to be investors because they tend to plan with purpose and think holistically when they’re building out their financial plans. They take into consideration their life goals for themselves and their families. They plan for the long term rather than focusing on the short term.
Saving money alone is not enough because inflation is eating away the value of our money everyday and reducing our dollar’s purchasing power. In order to overcome inflation’s effects, we need to be able to invest.
If more women knew that they can be good investors, that might help some of them overcome investing fears! Let’s spread financial wealth to everyone through knowledge!
I think when someone performs and practices the investing motions, they will alleviate their investing fears and get better at investing. You got this girl!
If you’re interested in learning how to take control of your finances and start becoming an investor like Warren Buffett, check out my free PDF guide.
I look forward to making more investor friends! Add me on Instagram: michellemarki 😀