One of the biggest conundrums in the financial world is
this: Survey after survey shows that women lack confidence when it comes to
investing and retirement planning. Yet if you look at the actual results, women
often perform better than men. Caryn Effron has seen this first-hand. A
long-time real estate professional, she was motivated to start the website GoGirl
Finance after witnessing a discussion between her college-aged son and
daughter, and their friends.
Women invest wisely: The
evidence shows that women are far wiser at investing than they realize.
Terrance Odean, a professor at Berkeley's Haas School of Business who has spent
his career studying investor trends, found that men traded 45% more than women
in the 1990s. He blamed it on male overconfidence.
All that extra trading actually caused men to have average
returns that were a full percentage point lower than women. Over the past
decade, the median returns for both men and women are 7.3% to 7.4%, according
to Fidelity data. But women's portfolios are much lower risk. In the investing
world, that's ideal -- get the highest return by taking on the least amount of
risk.
Women can end up with
more: Kathy Murphy, president of Fidelity Personal Investing, is quick
to point out that women save more than men on average and their investment
portfolios perform as well if not better than men's. Females typically save
8.3% of their income, while men only save 7.9%, Fidelity found after looking at
over 12 million retirement accounts and adjusting for certain pay disparities
between men and women.
That may not sound like a big difference, but it adds up
over time. Consider that the median household income in the U.S. is around $50,000.
If you apply those savings rates to the median income, women save about $200
more a year. So if their returns are about the same, women would end up with
more.
The data tell the
story: In a new study, Fidelity found that eight in 10 women admit
that they held back from talking about their finances, even with close family
and friends. It's telling that 77% of women report they are confident
discussing their health with a doctor on their own, yet less than half feel the
same confidence when talking about money and investments with a professional.
A seat at the table: The
key is for women to take a seat at the table and participate in the financial
conversation. This isn't just about gender equality, it's common sense given
the shifting dynamics of American households.
Already 40% of women out-earn their spouses, according to
Pew Research, and nine in 10 women are expected to be the sole financial
decision maker for their household at some point given that women are staying
single for longer and often outliving their partners.
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