Women Kick Men's Butts When It Comes to Investing

A woman wearing a red cape and business suit stands on the roof of a high-rise looking out at other high-rises.

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By Neale Godfrey, Financial Literacy Expert

published 24 September 2024

Watch out, men… McKinsey & Company has reported that by 2030, women in America are expected to control much of the $30 trillion in financial assets owned by Baby Boomers today.

OK, traditionally, women did defer to men to handle the money issues in the home. And we can also see this by looking at who is helping people to invest. The majority of financial advisers are men. The CFP Board reports that just 31% of financial advisers are women.

Let’s just shed the old paradigm that women are not as good with money as men. Why? Because it’s not true. Female investors get better investing returns than men, with studies finding differences of 0.4% to nearly 1%, according to The Motley Fool.

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Women are also more likely to be risk-averse. The McKinsey & Company report mentioned above found that women tend to be more concerned about meeting their financial goals, which means that they will stay the course while investing and not make as many buy/sell decisions as men will. Fidelity reported that 51% of female stock market investors were willing to wait out market volatility, compared with 43% of men.

Here’s the rub

Women’s investment account balances lag behind men’s by up to 44% due to the gender pay gap, according to Vanguard. Women earn less — about 84 cents for every dollar a man earns — so obviously, they invest less. If women could and did invest at the same rate as men, BNY Mellon estimated in 2022 that there would be an additional $3.22 trillion of assets under management.

However, the retirement savings gap has begun to improve. Fidelity Investments reports that 68% of women are saving for retirement vs 77% of men. In 2019, 66% of women were saving vs 82% of men.

Also, typically women are the caregivers to children, spouses, aging parents or others, and there is an immediate financial drain that inhibits women’s efforts to invest for their own future. Women were disproportionately hurt financially during the pandemic, with women worldwide experiencing job loss at a 5% rate vs a 3.9% rate for men, according to a 2021 report by the International Labour Organization. In the U.S., women also lost jobs at a higher rate than men, with women at the lower end of the economic scale being hit the hardest, according to Pew Research Center .

Many women also still lack the self-confidence to make their own financial decisions, according to the McKinsey report. These are lingering paradigms and old stories that girls and women were told throughout their lives. A UBS study found that the majority of women (51%) still defer to their male spouses for investment decisions, but 92% of women believe involvement in long-term financial planning can enable them to have a bigger impact on the world.

The young and the smart

Younger women are more likely to invest than older generations of women. The Fidelity study reported that 71% of Gen Z women are investing in the stock market, outpacing the older generations (63% for Millennials, 55% for Gen X and 57% for Baby Boomers). This younger generation seems to be gaining confidence in their ability to make their own financial decisions. They are willing to hang in there through the market ups and downs.

It’s not that Gen Zers are not nervous about economic uncertainty, because they are. And they also are very aware of the stress that financial decisions can cause. The study shows that many women feel they should be doing more with their money, saving more and understanding how to invest to reach their financial goals.

What’s a woman to do?

I think that you should start by finding a financial professional to help you lay out your goals, the price tag for those and how your investing plan will help you achieve your dreams. I’m not a great proponent of DIY financial planning. Why? Hey, you could do your own dry cleaning, but you don’t because you’re not an expert in dry cleaning. Why would you try to plan out your economic future by yourself? Your financial life is not one-size-fits-all. You need someone to understand your needs, your life and the ups ands downs that will happen along the way.

Also, stick to your values when you invest, give or work. Women do this naturally, according to a UBS Investor Sentiment Survey: 71% of women vs 58% of men invest based upon their values. Nine out of 10 women in another UBS survey said they believe that money is a tool that can help the world to be a better place for all. Most women (94%) said they made donations or volunteered their time, and 73% made purchases that aligned with their values.

My best advice? Find a financial adviser who shares your values and understands your goals and one who cares if you meet those. Ask your friends or colleagues about referrals. Interview the prospective FAs. If they try to sell you products before they ask about your goals and needs … run. I’ve had Mitch and Ann as my financial advisers for 35 years. They are trusted members of my inner circle who have my financial back. I wish the same for you.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Neale Godfrey is a New York Times No. 1 bestselling author of 27 books that empower families (and their kids and grandkids) to take charge of their financial lives. Godfrey started her journey with The Chase Manhattan Bank, joining as one of the first female executives, and later became president of The First Women's Bank and founder of The First Children's Bank. Neale pioneered the topic of "kids and money," which took off after her 13 appearances on The Oprah Winfrey Show.