In an investment climate marked by growth and volatility, the patience, persistence, and discipline of women have allowed them to outperform men on average while taking less risk — even though, as a group, they generally lack confidence about investing.
“What we found most interesting is that women have more experience with money and finance than they give themselves credit for having,” said Tracie McMillion, report author and the Institute’s head of global asset allocation strategy.
“Our analysis showed that oftentimes, women’s investment returns outperformed those of men on a risk-adjusted basis,” she said.
What are the positive traits and investment behaviors that helped women achieve higher investment returns? McMillion identified three from Wells Fargo’s research that she believes contributed:
- Patience — Women tend to trade less frequently than men and earn higher returns for the risks they do decide to take.
- Discipline — Women tend to adhere to an investment plan more faithfully, and that can to lead to better investment results. Previous research by Betterment, an online investment company, supported the view that women tend to be more disciplined — finding that male investors were six times more likely than women to make major changes in asset allocation, such as switching from 100 percent stocks to 100 percent bonds, or vice versa.
- Willingness to learn — Wells Fargo Investment Institute’s research indicated that women are more likely to seek education and advice from investment professionals. Twice as many women as men said that what they need most from a financial advisor is education about investing principles and concepts.
‘It's important for women to become more confident investors’
Due to longer life expectancies, McMillion said, nine out of 10 women will eventually manage their family’s wealth. And, she noted, a 2016 Bureau of Labor Statistics report found that while the gender gap in pay is narrowing, women earn 83 cents for each dollar that a man earns.
“It’s important for women to become more confident investors because they earn less than men and have longer lifespans, so their assets need to last longer.”
So, why are women less confident than men, given their greater on-average returns on investment? McMillion said Wells Fargo’s research found that more women than men believed that they lacked experience in investing. Sixty percent of men, according to the report, said they had a high level of investment experience versus 42 percent of women.
Women surveyed also had more uncertainty, she said, about the impact of external factors that influence investments — such as the relationship between bond prices and interest rates. Only 40 percent of the men were unsure if falling rates meant bond prices went down, went up, or stayed the same versus nearly 70 percent of women who weren’t sure of the answer.
Hear from several women about investing in a new Wells Fargo Investment Institute video (4 minutes) and read “Building on Strengths: How to Invest Like a Woman” — an interactive summary of the report’s findings.
Three steps to gain investing confidence
McMillion outlined a three-step approach to help women — and men — boost their investment confidence and maybe even their returns.
- Research — Read Four Steps of Successful Investing, published by Wells Fargo Investment Institute, visit investment websites, take an investment class, or meet with an investment professional. Learn what your employer offers, and explore individual retirement accounts and your spouse or partner’s retirement benefits, if applicable, for additional savings.
- Plan — Create a budget for saving and investing, and set goals with a time horizon and risk level you’re comfortable with.
- Act — Choose the asset allocation that works best for your personal financial situation and regularly monitor and rebalance your portfolio as necessary.
All investing involves risks, including the possible loss of principal. Equity securities are subject to market risk, which means their value may fluctuate in response to general economic and market conditions and the perception of individual issuers. Investments in equity securities are generally more volatile than other types of securities.
Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns.
Wells Fargo Investment Institute, Inc. (WFII) is a registered investment adviser and wholly-owned subsidiary of Wells Fargo & Company and provides investment advice to Wells Fargo Bank, N.A., Wells Fargo Advisors, and other Wells Fargo affiliates. Wells Fargo Bank, N.A. is a bank affiliate of Wells Fargo & Company.
The information in this report was prepared by WFII. Opinions represent WFII’s opinion as of the date of this report and are for general information purposes only and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally. WFII does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.
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