Are Women Really Better Alternative Investors Than Men?

December 13, 2021

Did you know that 67% of women now invest beyond their retirement accounts? That’s because these days, 40% of women are their family’s breadwinner, and 90% of women will eventually take charge of their family’s wealth.

That’s great news for women—but do women alternative investors outperform men?

Here’s a closer look at how women alternative investors approach their wealth, and how you can get smart with your own investment dollars.

The Gap Between Male and Female Investors

First, it’s important to understand that women invest quite differently than men. Even on the stock market, the gap is immediately obvious: 56% of Americans overall own stocks, but that translates to 66% of men and 48% of women.

And once you get in the details, there are even more significant differences between male and female investors:

  • 66% of women say someone else manages at least some of their investments, compared to 55% of men
  • 69% of women say they’ve learned how to choose investments compared to 83% of men
  • 29% of women say they feel anxious about investing, compared to 22% of men
  • 23% of women say they’re confused by investing, compared to 17% of men
  • 22% of women say they feel confident in their investments, compared to 41% of men

And yet, according to Fidelity Investments’ 2021 Women and Investing Study, women outperform men by 40 basis points or 0.4% annually, based on analysis of annual performance across 5.2 million accounts from January 2011 to December 2020.

The Gender Pay Gap and How We Talk About Money

If women do perform better than men, why are they less confident in their investments, and why are they less likely to have market exposure? This comes down to two things: how we talk about money and the gender pay gap.

Parents talk about money differently depending on whether they talk to a son or a daughter. Overall, girls are taught to save their money, while boys are taught to invest. This translates to significant gaps in what they learn:

  • 61% of boys receive a lesson on credit scores from their parents by the time they reach high school compared to 46% of girls
  • Boys are 9% more likely to be taught how to pay taxes
  • Boys are 5% more likely to be taught about bank accounts
  • Boys are 3% more likely to be taught about credit cards
  • Girls are 13% more likely to be taught to track their spending
  • Girls are 5% more likely to be taught budgeting

This is reinforced by the gender pay gap. Overall, women earn 83% of what men earn, with wider discrepancies often correlated to race. On average, women aged 25 to 34 earn 93 cents for every dollar men of the same age earn. This is not just because of gaps in higher-paying jobs, educational attainment, and work experience—a woman in the same position as a male counterpart with exactly the same experience at exactly the same company is more likely to experience discrimination. In fact, one in four women say they earn less than a man employed doing the same job.

Why Women Alternative Investors Outperform Men

Overall, the deck is stacked in favor of men, largely the result of gender discrimination. Women receive less investing education, earn less money to invest with, and are less confident in their investing decisions than their male colleagues.

So why do women outperform men by 40 basis points?

They’re More Risk-Conscious

For one thing, women are more risk-conscious than men.

On one hand, excessive caution is often the first barrier for women investors to overcome, and may keep them from investing at all. But when women do participate in investing, they’re more risk-conscious than men—72% of women reject riskier equities compared to 59% of men. That applies across the board, with 58% of male investors reporting that they’re willing to take financial risk compared to 37% of women.

Overall, men have higher portfolio turnover than women. The net result is a two-sided coin: on one hand, women are less confident than men, but men tend to be overconfident. That means women are more likely to invest conservatively, double-check their numbers, and take extra steps to mitigate risk. The result is better capital preservation than their male counterparts.

They Do Their Homework

To be clear, while women take on less risk than men, this does not mean they’re risk-averse. They are willing to take risks—they’re just more likely to take appropriate levels of risk after doing their homework.

That means women are less likely to chase a hot tip or invest on a whim (two of the biggest portfolio-weakening behaviors seen in men). They’re also more likely to have age-appropriate asset allocation, likely a combination of calculated risk and more widespread use of financial advisors.

They Favor Funds

Women’s outperformance can also be credited to the types of investments they favor.

Men are much more likely to hold speculative investments in the hopes of making a lot of money quickly, and they’re more likely to hold onto a losing investment in the hopes it will pan out. Women, on the other hand, are far more likely to take a “slow and steady wins the race” mentality and opt for a fund with a consistent track record. That means greater diversity and less volatility.

And while women and men invest similar sums in direct equities, men are more likely to reach for high-risk high-reward equities while women are more likely to reach for comparative safety.

The Tools Women Alternative Investors Need to Thrive

Women alternative investors have several tools that can allow them to thrive: they take their time to research, they reach for investments with proven track records, and they’re more likely to favor investments that offer steady returns and reliable diversification.

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