Female investors earned higher returns and saved more of their pay to fund retirement accounts than men, even though most women didn’t think they would, according to a recently released Women and Money Survey from Fidelity Investments.
The investment gains of women topped their male counterparts by 0.4% last year, according to an analysis of more than eight million client accounts at Fidelity. Similarly, an analysis of 14 million employer retirement accounts that are serviced by Fidelity found that women saved 9% of their paychecks in 2016, while men set aside 8.6% for their golden years.
While those differences might not seem like much, the combination of better returns and higher savings can add up to bigger account balances in the future. For example, a woman with a $75,000 salary who starts to invest at age 30 and saves 9% each year and earns a 6.4% annual return would have a portfolio worth nearly $200,000 more at age 67 than a man who saves 8.6% with an annual return of 6%, according to the Fidelity survey.
The irony is that when the nearly 1,500 women polled from Dec. 1 – 11 were asked who they thought would earn a bigger return in 2016 — men or women — only 9% of the female respondents thought they would do better, the Fidelity study found.
The results of Fidelity’s analysis underscore the view that women are underestimating their strengths as investors. And that realization could go a long way toward getting more of them actively involved in managing their own money, says Kathleen Murphy, president of personal investing at Fidelity.
“We’re trying to pierce the ‘confidence gap’ in their minds,” says Murphy.
The reason? Investing is a skill they must master. “Ninety percent of women,” she says, “will at some point in their lives be the sole decision-maker in financial matters, due to divorce, death and other circumstances.”
Nearly nine of 10 women surveyed say “more financial education” would provide them with “greater confidence” in managing their finances.
So what characteristics helped Fidelity’s female clients post better returns than men?
- Plan with purpose: Women think more “holistically” about their investments, and build their financial plans around life goals rather than trying to beat the market.
- Take less risk: They also benefit from making fewer risky bets, such as putting 100% of their money in stocks, which tend to suffer larger price swings and bigger losses in turbulent markets than fixed-income assets like bonds. Women also pick investments that are appropriate for their age and time horizon.
- Practice patience: Women place fewer trades, according to Fidelity, and tend to carry out a long-term, buy-and-hold strategy. Men are 35% more likely to make trades than women, Fidelity’s client data analysis found.
“The good news is many women are taking positive steps to save and invest effectively for the future,” Murphy says. “But there are still many who need to do more. Taking the next step to ensure that savings are invested properly and generating growth is critical to helping women progress toward their financial goals and live the lives they deserve.”
Via USA Today