Women and investing confidence: How do women talk about their investments?
Women differ substantially from men in how they relate to investing. Women view money, not in terms of performance, but in what goals the money can achieve. Instead of talking about the growth or comparative performance of different funds; women want information about reaching their long-term goals, like retiring at 65.*
I always say that when I am sitting down with my husband and wife clients, I need to say “Your investment returned 17% this year, which means you are on track to pay for your child’s college education.” The first half of the sentence satisfies the way the man thinks about money and the second half satisfies the way the woman thinks about money. If I only said your investment performed 17% this year, I am completely alienating 50% of my audience because I am not speaking their investing language.
Who is the one deciding the confidence level of investors? If men were to look at women, Do her male counterparts view her as less confident because she is not talking about or knows her year end returns? Or could women be looking at men as irresponsible investors because they are focused on returns and potentially taking unnecessary risk?
Women and investing confidence: Creating a strategy to achieve investment goals
Here’s a sad statistic: Just 20% of female breadwinners said they were ‘very well prepared’ to make wise financial decisions, versus 45% of their male peers.** Maybe this exists because these female breadwinners are speaking with males who talk about performance, versus goals?
Women are more self doubting when it comes to their investments, which also results in them not actively trading their portfolios. Instead, women employ more of a buy and hold strategy. Could this buy and hold strategy be a result of a lack of confidence in their investment decisions? But no trading decisions, is in itself a decision.
This lack of decision making may actually be beneficial. In 2021, Fidelity Investments posted the results of a study that showed that their female investors outperformed their male counterparts by .4%. This is interesting because according to the same Fidelity study only 33% of women feel confident to make investment decisions.***
When working with women, we identify their goals and then create a roadmap to get there. This results in financial confidence because they know investing is a means to an end. In turn, our clients know their investments are positioned to achieve their goals, not just a rate of return. Fidelity’s study confirms that: 71% of women said once they had set up a financial plan, they felt more confident.
According to Fidelity, 77% of women believe that if they had a financial advisor to help them invest, they’d be more confident about their financial future.
Since we now have a better understanding that women can be just as confident as men when it comes to investing, they just communicate and think about investing differently. Let me give you some insight into the male investing brain. Men prefer independent financial decision making that tends to react in response to market trends, meaning a man will actively trade to seek to make as much money as possible. Men see the world as a competitive place. Which makes them more likely to make decisions based on the need to beat a competitor, which disregards risk. Men also communicate in regards to their investment performance, not the ability of the investment to achieve a goal. Men are from Mars and Women are from Venus, right?
If you would like to be part of the 71% of women that have confidence due to a financial plan, let’s talk.
Fact: Women invest for goals. Men invest for returns.