Women and investing: How psychology plays a role

Women and wealth

Perhaps the biggest challenge women face when it comes to investing is a lack of confidence that they will make sound investing decisions.

“Women tend to be self-deprecating, believing themselves to be less experienced, not necessarily well educated in investing and not as good at investing as men,” says Karen McNeill, director of family history at Ascent Private Capital Management of U.S. Bank.

That self-doubt, combined with lower earnings and family responsibilities, means women often delay getting started with investing. “But once they start, studies show women outperform men,1” adds McNeill.

Women often delay getting started with investing. But once they start, studies show women outperform men.

Why women thrive when investing

Women have an important reason to build long-term wealth for themselves: they outlive men by an average of almost 5 years.2

The good news is women tend to hold their investments for longer periods than men, which can help reduce transaction costs and grow wealth over time.1 Women also show a tendency to invest in stocks with better, more consistent track records than men,1 who often take chances on riskier investments.

But because women tend to start investing later than men, they can miss out on significant amounts of compound interest.

Grow your investing confidence

Here are four ways you can become more confident in your investing approach.

Know your goals. Whether you’re saving for a vacation, a home or retirement (or all three), knowing what you want to achieve can help you make the most of the money you’re investing.

Take assessments. Whether from a financial professional or a website, evaluations can provide insights into how you approach money and help you understand things like your investment risk tolerance.

Contribute as much as you can. The answer to when to invest is usually now. When it comes to how much, aim for as much as possible, especially early on to take advantage of compound interest and time in the market. Maximizing 401(k) contributions is a good way to make investing essentially automatic.

Seek out a financial professional. A professional can help you better understand your approach to investing, as well as your options. McNeill suggests choosing one you feel comfortable talking to about any financial issue. “It should be a safe space to have conversations and make decisions about investments,” she says. Be clear when discussing what you want for your future. The more candidly you lay out your goals, the easier it will be for a professional to help you choose the best investments to generate the financial return you will need.

¹ Are Women Better Investors Than Men? Here’s What The Studies Say. Investor’s Business Daily, 7/16/2018.
² Life Expectancy at Birth (in years), by Gender. Henry J. Kaiser Family Foundation.