Women and Investing: Closing the Gender Investment Gap

Most everyone has heard of the gender pay gap, but many don’t pay a lot of attention to the gender investment gap and why the long game matters for women.

“Women of all ages, education levels, and income brackets are playing catch-up when it comes to investing in the long term,” said Brie Williams, a vice president of State Street Global Advisors and head of practice management for the Global SPDR Business.

While women are more likely to control the finances in a home, Williams said, they have historically been less likely to invest.

On average, women earn less than men (15% less, $22 vs. $26 hourly, on average, in 2018, according to the Pew Research Center), and that affects long-term savings and investing.

But all of that could change.

“Women are now outpacing the growth of the investment market overall,” Williams said. If the trend continues, the gender investment gap could close for good.

During a live chat with SoFi financial planner Lauren Anastasio, Williams broke down some misconceptions surrounding women and investing, and how women can kick-start their investment strategy.

Why Do Women Need to Invest More?

Not only is the average woman further behind in investing than men are, but she needs to be putting more away for retirement, Williams said. Here’s why:

•  Women typically live longer than men. In developed countries, women live to 79 on average, compared with men, who live to 72, according to the Population Reference Bureau. Logically, because women will be living off their retirement savings longer, they’ll need more for retirement. That could mean health care costs and other cost-of-living expenses.

•  Women step in and out of the workforce more often. Women are more likely to take time off from work or leave the workforce for an extended period, thanks to child care or elder care needs, Williams said. The majority of family or informal caregivers are female, according to the American Psychological Foundation. Because they’re in the workplace less, they have lower lifetime earnings. That means every penny they do invest matters more, because they earn less, on average, and are more likely to be in the workforce less.

•  Women focus on short-term money matters. Most people are aware that women are more likely to control the household finances, Williams said, but short-term savings and long-term investing strategy are different things. “It’s not that women are not engaged” with financial planning, Williams said, but “the data shows that behavior skews toward short-term money matters, not long term.” Not only do women have to start investing more, she said, but they might need to out-invest their male counterparts to meet their far-off goals.

Staying the Course

In general, once women start investing, they tend to be more successful overall, Williams said.
That starts with how often women trade, she said.

“Women tend to pay less in fees because they trade less frequently,” she said. Commission fees can add up, eating into an investor’s long-term gains.

Women buy and hold investments longer because they are more likely to stick to one plan, said Williams, who added that overall, women tend to be less emotional about their investments, even during market fluctuations.

“It is not true that women are really emotional when it comes to investing,” Williams told Anastasio.

Once women have a long-term strategy in place, they tend to stick to it. It’s just a question of having the right help and gaining the confidence to invest wisely.

Finding the Right Financial Professional

Committing to an investment strategy on your own can be intimidating, and women are less likely to seek professional help when it comes to financial planning, Williams said.

“Many women do not have great experiences with financial planners or advisors early on, if they had exposure to it at all,” she said.

That distaste, fear, or lack of exposure may keep them from engaging with a professional, who could make reaching investment goals easier.

While professional financial planning services have not always been geared toward women, more and more companies are approaching female investors with “respect, inclusion, and services that meet our needs,” Williams said.

That doesn’t mean just anyone will do. Here’s what Williams recommends to women who are considering or searching for a financial planner:

•  You don’t need to be an expert before you hire an expert. You wouldn’t read every nutrition book out there before you started trying to eat a healthy diet, so why do women feel they need to be pros at investing before working with a planner? The right financial professional should make a person feel more confident about her goals, and match her style and approach to money. That kind of relationship means more honesty and transparency throughout the process. There will always be time to learn more, but that personal connection can’t be taught.

•  It’s your money, so ask for what you need. Finding the right professional to work with can be similar to dating. Don’t settle for someone who doesn’t believe in the same approach or goal-setting. It’s a financial planner’s job to get to know you and help you achieve your goals as best as you can. “Working with an advisor is not just about making a return; it’s about protecting your assets,” Williams said. If you don’t agree with your advisor’s strategy, it’s OK to move on, she said, adding that finding the right fit could mean trying a few out before committing to one.

•  Avoid second-guessing. Women tend to be better at self-assessment—more realistic and comprehensive about strengths and shortcomings, Williams said. This can help in setting realistic expectations, but it’s a double-edged sword. Women tend to overthink decisions, second-guessing themselves when they’re not 100% confident, she said.

When second-guessing starts, Williams suggested that female investors look at their decisions and information in “digestible bites.” Consider the one choice at hand, not an entire portfolio or strategy, then move on. The more decisions a person makes, the more confident and empowered she will become. Even the smallest choices can build morale, taking a woman one step closer to her long-term financial goals.

Taking the Plunge

Women might start out from behind when it comes to investing, but trends show that they may be able to match, and surpass, men in due time.

With SoFi Invest®, women can get started with as little as $5 and trade stocks and ETFs with no commission. Choose from automated or active investing.

And as a member, you can sign up for a no-cost consultation with a financial planner.

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