Examining Male vs. Female Investment Behavior

November 04, 2018 · 7 minute read

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Examining Male vs. Female Investment Behavior

We’ve all heard the stereotypes: Women are shopaholics racking up credit card charges to add one more pair of shoes to an already overflowing closet. Men bring home the bacon and are savvy investors that understand how to manage money and take advantage of opportunities. These hackneyed images are reinforced by the media and popular culture.

It’s clear that these clichés are vast generalizations that don’t at all reflect the variety of financial prowess and behaviors among people of all genders. But have you ever wondered whether there are real differences in what men and women do with their money? Specifically, do they make different decisions when it comes to investing?

Investing is critically important to achieving long-term financial goals — from saving for retirement to paying for children’s college educations. That means any gender differences in this area would have massive implications for equality and financial security, especially since women tend to live longer than men. As the American poet Carl Sandburg said, “Money is power, freedom, a cushion, the root of all evil, the sum of blessings.”

So, are women from Venus and men from Mars when it comes to investing? Here’s what the data says about gender differences in investment behavior:

1. Fewer Women Than Men Invest in the Stock Market

Men are more likely than women to be investors. One study found that women hold 71% of all their assets in cash, whereas men hold 60%. Cash can feel more secure, but it also decreases in value over time due to inflation and has limited growth potential.

Over a 35-year career, that investing gap, combined with the wage gap and other factors, could mean failing to capture $1 million in value. In the same vein, men of all ages are five times more likely than women to say that investing is their most important goal.

2. Women Are Less Confident About Investing

When it comes to putting money in the stock market, men tend to have more confidence in their knowledge than woman do. According to one recent study, only 52% of women say they’re confident about managing investments, compared to 68% of men.

Self-assuredness among women grows along with the value of their assets, with 43% of women with fewer than $100,000 in assets expressing confidence, compared with 75% of women with at least $250,000 to their names. However, in each category, men are consistently much more confident than women. Anxiety about investing has carried on to younger generations: A study by SoFi and Levo found that 56% of Millennial women don’t invest because they’re too worried about the outcome.

Some of this gap may have to do with actual differences in training: While 35% of men say they learned to manage their money in high school or college, only 27% of women say the same. But it’s likely that at least some of the confidence gap reflects internalized messages from society and culture.

After all, 81% of women who invest said they’ve personally been a victim of negative stereotypes, including about their investing abilities.

3. Women Earn Higher Returns

Women’s self-doubt about investing is unwarranted when you look at the facts. Several studies have shown that women are better investors than men as a whole. A study from Fidelity Investments, based on data from more than 8 million clients, showed that women performed better than men by 0.4% . While this doesn’t seem like much, it can have a huge impact over time, especially when combined with the fact that women tended to save slightly more out of their paychecks toward retirement.

For example, the higher rate of return would mean that a woman who invested 9% of her salary annually (the average for women) starting at age 22 would end up with 15% more at age 67 than a man who invested 8.6% annually (the average for men).

Another study by Wells Fargo showed that women who managed their investment accounts not only saw higher returns than men, but also that their returns showed less variability.

These results jive with earlier studies by professors at the University of California, who found women beat men in the market by about 1% a year .

4. Men Are More Comfortable with Risk

Although it’s not true for everyone, studies also show that women overall are less comfortable with risk. The Fidelity study found that women were more likely to invest in target-date funds , which are inherently diversified and tied to a risk level appropriate for your age, and less likely to have all of their assets in their retirement accounts in stocks, which are the most risky asset.

Another report found that 29% of women , compared to just 21% of men, said they were focused on reducing risk in their portfolio. On the other hand, just 2% of women, and 6% of men, said they were interested in taking more risk.

This difference applies to younger generations, too, with 14% of Millennial men saying they “embrace risk,” compared to around 7% of Millennial women.

Some of this goes back to the messages people received growing up. Even among Millennials, women were more likely to have had parents encourage them to save , and men were more likely to receive lessons on growing their money. Women’s discomfort with risk is a mixed bag. Overly aggressive investing may make returns more volatile and lead to big losses. But not taking enough risk may mean not earning high enough returns to fund long-term goals.

5. Women Are More Patient Investors

Several studies have shown that women trade stocks less often than men do. One report found that men are 35% more likely to buy or sell stocks than women. Single women trade 27% less frequently than single men (men’s trading activity generally tends to quiet down when they are sharing accounts with women.)

While strategic trades on the stock market can be smart, it’s also important to note that trading too frequently can reduce returns and is sometimes a sign of thinking you know more than you really do.

6. Women Are More Open to Seeking Investment Guidance

When it comes to investing, women are more willing to ask for directions. According to Wells Fargo, twice as many women as men say they want financial advisors to educate them about the principles of investing.

Similarly, Fidelity found that only 14% of women said they learned about investing in school, and 90% of women want to learn more about financial planning and investment choices.

This desire for education could stem from that pervasive feeling among women that they don’t know enough. But a desire for guidance doesn’t necessarily translate into action. Women are less likely than men to seek out a financial advisor, with six out of ten women saying they’ve never spoken to a financial professional.

7. Millennial Women Are Investing Earlier Than Their Predecessors

The majority of Millennial women (63%) say they started to concern themselves with investing in their 20s, while that figure was just 28% for Gen X women and 16% for Baby Boomers.

But Millennial women also have different expectations about what those dollars will do for them. The majority just want their investments to come out in line with how the market has performed. About half of older women, however, say their top priority is to beat the market in the long term.

SoFi Invest® as an Investment Option

Past trends are not a predictor of the future. Men and women both have lessons to learn from each other’s investing patterns. Generally speaking, women might want to think about investing more and taking risks that are appropriate for their age and life goals.

Some men, on the other hand, might want to think about taking a less hands-on approach to buying and selling stocks and tempering their confidence with diversified assets and advice from professionals.

SoFi Invest allows investors of all genders to get into the stock market through a low-cost, diversified portfolio of Exchange-Traded Funds. You can invest through retirement accounts or a general invest account, and the investment mix is tailored to each individuals’ age, goals, and risk tolerance.

A complimentary Sofi Invest Financial Advisor is on hand to explain unfamiliar concepts and guide your investment decisions. Advisors also rebalance your portfolio at least quarterly to make sure it stays aligned with your preferences. You can get started with just $100, and you won’t pay any SoFi management fees.

It’s always a good time to start saving for your future. A SoFi Invest account can you put you on the path to smart investing, whatever your risk tolerance may be.

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SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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