There is no shortage of male presence in the corporate world. Male CEOs far outnumber female CEOs in FTSE100 companies. The picture is similar in the financial sector. To some, this may suggest men are better suited to jobs in finance and investing than women. However, according to a survey by Fidelity Investments, this is not really the case. In fact, the survey showed that female retail investors outperform their male counterparts.
Let’s find out why women could prove to be better than men when it comes to investing and finance.
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Debunking the myth
When it comes to financial matters, women appear to do a better job than men, according to the 2021 Women and Investing Study. Female retail investors were found to consistently outperform male investors by an average of 0.4% a year. Furthermore, we’ve seen more women than ever before invest outside of retirement (67% in 2021 vs 44% in 2018). While women outperform men, they were also found to be better at saving money by almost 1% annually.
Whilst the study revealed women’s superiority when it comes to investing and saving, it also provided an insight into the public outlook of the matter. Only 9% of respondents believed that the women were actually better. It is clear that stereotypes remain strong but nonetheless, the data tells a different story.
It is also worth mentioning, that a recent Moneybox survey revealed similar results. Since last March, they have seen a 9% increase in women opening a stocks & shares ISA or stocks & shares LISA and a 5% increase in women opening a self-invested personal pension (SIPP).
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What makes women better investors than men?
The evidence may be conclusive, but it’s also worth contextualising why female retail investors outperform their male counterparts. A lot of this comes down to strategy. Women are more likely to take the long-term investing approach, whilst some men are prone to more impulsive routes. Women are typically more risk-averse and long-term investors, which puts them one step ahead.
Another reason is that men tend to focus more on the equity market. Whilst women tend to diversify their portfolios and invest in funds, bonds and equities. Diversifying your portfolio is traditionally a great strategy for coping with turbulent times. Lastly, Fidelity also found that men are most likely to make trades (35%). Whilst most brokerages firms do not charge transaction fees, some still do, and that could significantly eat away at the value of your investment returns.
Why is this important?
You might be quick to dismiss the data. After all the difference found between female and male investors is less than 1%, right? Well, think again as any savvy investor knows that little differences compound over time to make massive differences.
Let’s look at an example to make this clear. Imagine that you open a stocks and shares ISA at the beginning of the financial year with a £1,000 initial deposit. For the next 30 years, you max out your annual ISA allowance of £20,000 (assuming it won’t change) and see a consistent annual return of 6%. This will see your portfolio grow to £1,586,907 in 30 years. Now let’s just adjust the numbers to allow for the additional 0.4% (6.4%) return of the female retail investor.
Assuming everything else remains constant, this will result in a portfolio worth £1,703,480 over the same period. This is an additional £116,000 that could be put to good use in retirement. Increase the return more and the difference becomes even more stark.
The bottom line
The data paints a clear picture: female retail investors outperform their male counterparts. Women are also more efficient when it comes to savings. However, this doesn’t mean you have to despair if you are a man or rejoice if you are a woman.
The truth is that women tend to make better investment and savings decisions when they take a more risk-averse and long-term approach. This shows that we could all take a step back, consider the bigger picture and learn from these findings.
