Here, McGregor and Sabbia point to some of the likely reasons for this performance difference1,2— and what we can learn from them.
Women tend to be patient investors. They generally develop a strategy and stick to it, buying and holding for the long-term, rather than buying and selling reactively, or day trading. This “steady as she goes” approach requires fewer trades and therefore incurs fewer transactional fees, which can help to create better returns over time, McGregor notes.
Women tend to favor a balanced investing approach. They generally aim for a more diversified asset allocation — not one that tilts heavily toward stocks versus bonds or a certain market sector like technology, or loads up on an individual stock, McGregor observes. This more balanced, risk-averse approach may help to preserve their portfolios when the markets get volatile. But, cautions McGregor, “being too conservative could cause investors to miss out on potential growth opportunities.”
Women are generally not afraid to ask questions. They tend to seek out information before investing. “It’s a process of drilling down and understanding what we’re investing in and why before we make a move,” notes McGregor. Women also tend to be more open to advice, whether it’s from a professional or through a financial mentor, she adds.
Women tend to invest with goals in mind. They’re investing for their family’s future security, a child’s or grandchild’s education, a dream vacation or a first or second home, rather than trying to outperform a market benchmark. “Having more immediate goals in mind can help investors stay focused and stick to their plan,” Sabbia says.