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What We All Can Learn from Women Investors

September 27, 2019

“INVESTING IS ABOUT INDEPENDENCE and empowerment,” says Marci McGregor, senior investment strategist in the Chief Investment Office for Merrill and Bank of America Private Bank.

That’s true for both men and women, of course. But for women—who tend to live longer than men—investing can provide a financial lifeline, especially as they face higher health care costs in retirement, notes Lorna Sabbia, head of Retirement & Personal Wealth Solutions for Bank of America.

 

All the more reason to celebrate this finding:  “When women invest, they tend to have a better average annual return from their investments than men,” McGregor says. Several studies have shown that their portfolios outperform men’s by an average of anywhere from 0.4 percent to 1.8 percent annually.1 That may not seem like much, notes McGregor, but it can have a major impact over time.

 

Header of the image as Lessons from women investors. Image detailing four lessons from women investors. Image is a box containing paragraphs describing the four lessons, which are surrounded by images. The first image on the left of the first paragraph, there is an image of a calendar graphic on a tablet device. The first paragraph contains title as Stick To A Plan, text below it reads, Invest for the long term, text continues, rather than in-and-out short term trading, so you will pay fewer trading fees. The second image on the right of the second paragraph, there is a bullseye image. The second paragraph contains title as Shoot For Goals, text below it reads, Invest with a goal in mind, text continues,—which can help you craft a plan you believe in, and stay the course, text continues, once you’ve put it in place. The third image on the left of the third paragraph, there is a pie chart with one section sticking out. The third paragraph contains title as Balance Risk And Reward, text below it reads, Choose allocations carefully, text continues,—and don’t build more risk into your portfolio than you’re comfortable with—so you can stay the course (bold) when markets get volatile. The fourth image on the right of the fourth paragraph, there is a stack of reference books. The fourth paragraph contains title as Seek Guidance, text below it reads, Ask questions and seek guidance—overconfidence can work against you, text continues, so gather all the information you need to make the right decisions.

Here, McGregor and Sabbia point to some of the likely reasons for this performance difference1—and what we can learn from them.

 

Because women tend to live longer than men, they have more time to invest—and that means more time to let their investments grow. Make longevity your best asset. —Marci McGregor, senior investment strategist in the Chief Investment Office for Merrill and Bank of America Private Bank

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 so incurs fewer transactional fees, which can help to create better returns over time, McGregor notes.

 

They tend to favor a balanced investing approach. Women 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.”

 

They’re generally not afraid to ask questions. Women 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.

 

They tend to invest with goals in mind. They’re investing for their families’ 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.

 

And women have one more advantage: they can make their own longevity an asset. “Because women live longer than men, they have more time to invest—and that means more time to let their investments grow. Make longevity your best asset,” McGregor urges. Sabbia agrees, noting that a 2018 Merrill/Age Wave study, Women & Financial Wellness: Beyond the Bottom Line, found that 41% of women wish they had invested more of their money.

 

“Don’t let yourself end up regretting you hadn’t invested more,” Sabbia says. Women often play catch up as a result of the wage gap and caregiving responsibilities, which can limit their savings and investment opportunities. “That’s why it’s so important for women to invest early and often, and to stay focused on making the money they earn work hard for them.”

 

1 Reuters, “Why women are better investors: study,” 2017
Warwick Business School, “Are women better investors than men?”, 2018
The Washington Post, “Behavioral economics show that women tend to make better investments than men,” 2013 

 

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management (“GWIM”) clients, is part of the Investment Solutions Group (“ISG”) of GWIM, a division of Bank of America Corporation (“BofA Corp.”).

 

Bank of America is a Marketing name for the Retirement Services business of BofA Corp.

 

Opinions and investment strategies referenced are subject to change.

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