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Industry Spotlight > Women in Wealth

Women Are Savvier Investors Than They Think

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Female investors underestimate themselves.

Just 9% of women participating in a Fidelity Investments study believed that they had outperformed men during the past year.

The evidence suggests otherwise.

Fidelity reported that growing body of research, including an analysis of the investing behavior of more than 8 million Fidelity retail customers in 2016, showed that women tended to outperform men in generating a return on their investments.

Fidelity said it was concerning that so many women doubted their money management capabilities. Asked what financial life skills they wished they had learned earlier, the number one answer was “how to invest and make the most of my money.”

Research findings indicate that women have learned far more than they realize.

For one thing, Fidelity’s client data analysis showed that when it comes to investing, women on average performed better than men by 40 basis points last year. A small difference, perhaps, but potentially significant over time, Fidelity said.

The analysis also found that women came out on top in a comparison of annual savings rates.

Women consistently saved a higher percentage of their paychecks in workplace retirement accounts than their male counterparts at every salary level: an annual average of 9%, compared with an average of 8.6% by men.

As for accounts outside other than workplace savings, such as IRAs and brokerage, the data showed that women added an average of 12.4% to their account balance, compared with 11.6% for men.

Source: Fidelity

Fidelity said that during the past three years, it had seen the number of women investing their money with the firm grow by 19%, to more than 12 million.

“The good news is many women are putting themselves in the financial driver’s seat, taking positive steps to save and invest effectively for their future,” Fidelity’s president of personal investing, Kathleen Murphy, said in a statement. “But there are still many who need to do more.”

Murphy said saving alone does not keep pace with inflation; by not investing, one is likely losing money. “Taking the next step to ensure that savings are invested properly and generating growth is critical to helping women progress toward their financial goals and live the lives they deserve.”

Orc International, a research firm, conducted an online omnibus survey in early December among 2,995 U.S. adults: 1,496 men and 1,499 women. In early January, it surveyed 514 men and 511 women, 18 years and older, who indicated they had some type of investment account.

Women’s Skills and Strengths

Fidelity’s customer analysis showed that certain characteristics sometimes viewed as being inherently feminine may be helping women experience strong returns on their investments.

Women often build financial plans in terms of life goals for themselves or their families, rather than focusing solely on performance. They tend to buy and hold stocks, rather than react quickly to market fluctuations.

Women’s savings are likelier than those of male counterparts’ to be allocated in a more age-based allocation of investments. Fidelity analysis of retirement savings accounts over the last three years showed that the number of women who allocated appropriately for their age had increased by some 40%.

Moreover, fewer women than men had invested all their savings in equities, with attendant risk and lack of diversification. They were likelier to invest in target date funds, ensuring they were well diversified. (Fidelity is a major provider of target date funds.)

Fidelity’s client data showed that men were 35% more likely than women to make trades. In 2016, men who traded made an average of 55% more trades than their female counterparts.

Fidelity said that in its experience, taking part in live and digital events designed as part of its women’s education program could be a catalyst to taking action. The firm has seen a 25% year-over-year increase in the number of guidance interactions among women participating in these events.

More Financial Education Wanted

Fidelity said its research among professional women across the U.S. found that more than 90% wanted to learn more about financial planning. Many needed to catch up, with a majority reporting a lack of opportunity to learn financial skills earlier in life.

A recent study found that many women are unprepared to inherit wealth and pass it on.

Most women’s parents are their chief source of financial advice, yet just 20% said they felt well prepared by their parents to manage their finances as an adult. Only 24% learned about budgeting and setting financial goals in school, and 14% said they had learned about investing.

Earlier this year, Fidelity reported a parent-child disconnect on discussing of estate plans.

Overall, just 9% of women reported that their education through high school had prepared them to manage personal finances as an adult. Ten percent said this of their college education.

Eighty-eight percent of women said more financial education would provide them with greater confidence in managing their money, yet many hesitate to reach out for help.

Fidelity found that six of 10 women across all generations had never consulted with a financial professional. Among this group, the main reason was feeling like they did not have enough money.

Other barriers were not knowing where to start and simply not making it a priority.

Recent research found that men were likelier than women to seek financial advice.

“Taking just one step can break the inertia holding many women back,” Alexandra Taussig, senior vice president of women investors at Fidelity, said in the statement.

“Whether you’re just getting started building a plan, looking to become more active in managing your investments or determining how to make your savings last through retirement, commit to following through with one new step toward that goal. In most cases, you’ll find you’re off and running.”

— Check out Companies With Female Leaders Outperform: ThirtyNorth on ThinkAdvisor.


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