Countless times I’ve been in a room with a female client who hesitantly says she doesn’t know much about money, let alone investments. She may also say she’s embarrassed that she hasn’t looked at her investment account in years. I always make it clear that what she feels as a negative may actually be a very GOOD thing. Let’s talk about why.
Research shows that we, as women, tend to doubt our knowledge and abilities when it comes to investing our money for the future. But the same research shows that women are BETTER investors than men, even though we tend to doubt ourselves. Fascinating, right? We tend to underestimate our abilities, yet our investment portfolios outperform men’s. And conversely, men overestimate their abilities, and their investment portfolios underperform ours.
If we dig in a little deeper, the research tells us that we generally trade less in our accounts, whereas men trade more. The former – sticking to a strategy – pays off in the long run. Additionally, we choose less risky investments (boring and stable), as compared to men (they tend to jump in more quickly to “flashy” or “fad” investments). Here, again, the former tends to pay off over time. In the investment world, making superior returns with less risk is the gold standard. So, how can we flip the script and resist feeling insecure in this space?
I think what we feel as a lack of confidence should be reframed into healthy humility. Unless you’re a dentist, you probably don’t care about the brand of tools your dental hygienist is using. Similarly, unless your job is in the world of personal finance, you probably don’t care much about the individual investments in your portfolio. And that’s OK! You have enough on your plate. Humility serves someone in that position well. After all, it’s not “humility” that comes before the fall, right?
In my experience, women tend to be more comfortable with what they don’t know regarding personal finance. They’ll seek out an expert, ask thoughtful questions and then trust the guidance they’re given, rather than seeking to know more than the expert they’ve hired.
My intent here is not to make generalizations about the way men or women approach investing. But, rather, to point out that as women, we should NOT feel insecure or inferior if we don’t know much about investing or if we simply don’t care to know much about it.
PYA Waltman Capital, LLC (“PYAW”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about PYAW’s investment advisory services can be found in its Form ADV Part 2, which is available upon request. PYA-23-15.
Sources: "Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment" by Brad M. Barber and Terrance Odean; "Women and Investing: 30 Years of Research and Statistics Summarized" by Lyle Daly; "Op-Ed: If Female Investors Have Any Weakness, It's Their Mistaken Belief that They're Not Good Investors" by Meghan Railey.