MYTH #2: women are not as confident as men when it comes to investing.
In my experience I have found that there are many preconceived notions about women and money; Some may think that women lack investing confidence. It is not often that you hear a group of women talk about their investments. I believe that is because women have a different relationship with money than men and the different relationship results in misconceptions of women and their financial confidence.
This is the second post of a blog series that bust three myths about women and money. Learn more about Myth #1: Women spend more money than men and Myth #3: Women aren’t financially savvy by checking out my previous blogs.
WOMEN AND INVESTING CONFIDENCE: ARE WOMEN GOOD AT INVESTING?
In my work as a Financial Advisor for women, I find that women are underserved by the Financial Services industry. In my opinion, this is happening for one big reason: only 16% of advisors are women. If a woman wanted to work with someone who is “like her,” she only has a 16% chance of that happening. And right there I am making the huge assumption that all women are similar. Which we know is incorrect. So, if a woman is trying to find a professional resource that thinks similarly, has a similar background and views, the odds are slim. Unlike men, who have almost 6x more of a chance to work with someone “like” them.
I can’t help but think this underservice contributes to a lack of female financial communication and makes us wonder if women are good investors.
Myth #2: Women are not as confident as men when it comes to investing.
It is rare to hear women talking about the returns of their 401k or the latest hot stock they bought. In fact, you’ll probably never hear investment jargon come up at Girls Night Out or while Moms are watching soccer practice. If investments come up in conversation, you may quickly see the women bow out of the conversation. It may be assumed that the lack of discussion is due to a lack of knowledge or confidence.
Does investing confidence = investing success?
We often make the mistake of assuming that the person that is the biggest braggart about his investments and money is the one with the most success. But what if we are thinking about investment success all wrong?
If you see someone take more investment risk and memorize their year over year returns, does that mean they are a good investor?
Or does a more confident investor assign a goal to their money and then create a plan to achieve the goal?
Could it be men and women just think about investing differently?
Women and investing confidence: Money is the means to the end.
Women view money as the means to the end, not the end itself. Money is a tool, it is the way we pay for goods and services. You can have a pile of money, but you need to exchange it in order for it to have actual value.
Women think of money as what it can do for them. Which makes sense, if you look at my blog about Myth #3- Are Women Financially Savvy? Women make most of the day to day financial decisions for a household. So, they see the exchange of money for goods or services daily. They have confidence in those decisions because they have experience versus not participating or being the decision maker of larger financial decisions.
Money is not looked at as the end itself, it is the means to the end. Money is not the goal, the goal is what money can do for you. Meaning, women are not striving to have a certain dollar amount in an account, they want to make sure the dollar amount they have can achieve their goals.
Women tend to view investing with a longer-term, non-monetary mindset that balances independence, financial security, and quality of life. Women look at money and life holistically. They want their money and life to overlap. Money has more of a feeling versus a dollar amount. Do their investments align with their beliefs? Does their financial plan align with their goals?
Bottom line is: Women want to enjoy their life and have enough money to do so. The good thing is that their focus is not building up a large bank account or 401k balance, they just want to be able to achieve a goal. But, it is hard to measure “enough” and when do we know when we have “enough”?
Women and investing confidence: How do women invest?
Women believe that investing is a life skill, not a one time event.
Investing is a skill that is constantly evolving and improving; a sword that continually needs to be sharpened. Education and practice help to develop the expertise, but also realizing that “expert” is a title that will likely never be achieved.
Women take more time researching their investments and gather advice from professionals before committing. Women see the world as a network of connections.
When investing, women want to focus on not losing money. And as a result, women want to be aware of the risk they are taking. Is the juice worth the squeeze? Women are typically not high risk investors due to the desire to not want to lose. But low risk doesn’t necessarily mean low confidence. Women are measured and want to take the appropriate risk in order to achieve their goal.
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.
