Women are different than men. As a Certified Financial Planner® this holds true in the investment world. Women are faced with unique challenges as they prepare for retirement. Women live longer than men meaning their retirement assets need to last longer. A 65-year old woman is expected to live, on average, another 20.3 years. Also, women earn less than men. Part of the reason is that women are more likely to work part-time jobs and there are gaps in employment due to the birth of a child. Therefore, social security payments for women are generally lower.
However, research tells us that women are excellent investors. According to Openfolio, an online investment platform, female investors outperformed male investors by an average of 0.4 % in 2014. In another study by SigFig, women outperformed men by 12% in 2014.
So Why are Women such Great Investors?
Women are Committed
Women are more likely to stay committed during a recession. Women stay the course and are more stable with their investments. According to Gary Dayton, founder of TradingPsychologyEdge.com, women tend to be calmer, remain steady under pressure, and do more research. These character traits are important because women stick with the plan and trade less. In a 2001 academic paper, "Boys Will Be Boys: Gender Overconfidence and Common Stock Investment" Brad Barber and Terrance Odean found out that men trade more excessively than women thus hurting portfolio returns. Women are more patient thus producing positive long-term investment portfolio returns.
Women save More
Women are more likely to save than men. According to Vanguard, women save across all income levels 7% and 16% more than men. Fidelity found out among its clients that men save 7.9% of their salaries and women save 8.3%. Women also save more in their retirement plans than men. The participation rate for women is 73% and only 66% for men. You may say these percentage amounts are small, but over time the values really add up. Since women live longer than men, saving more is beneficial because their retirement assets need to last longer.
Women Ask for Help
Women are more likely to use a financial adviser. According to Prudential's 2012 - 2013 Research Study titled "Financial Experience & Behaviors among Women", women seek financial guidance from a financial professional more than men. Working with a financial adviser pays off in the long run. My recent article, "How Much is a Financial Planner Worth?" explains that working with a financial planner pays off in the long run. The conclusion of Vanguard's study "Quantifying Vanguard's Alpha" was that working with a Certified Financial Planner® increases the client's portfolio return by 3%.
Six Steps to Take
- Begin working with a Certified Financial Planner® that is affiliated with an independent Registered Investment Adviser (RIA) firm to help you prepare for retirement. An independent CFP® works with his or her client's in a fiduciary capacity. This is extremely important because this type of financial planner.
To learn more about Blake Fambrough and his approach to financial planning designed for women view his Paladin Registry Research Report.
Originally posted on PaladinRegistry.com.
About the Author: Blake Fambrough Financial Advisor with Dubots Capital Management attended Texas Tech University and received a B.B.A. in Finance and a M.S. in Personal Financial Planning. In addition, Blake holds the Certified Financial Planner® designation. He has been working in the financial services industry since 2004. He is a member of the Lake Elsinore Rotary Club. Blake with his wife Christina and their daughter live in the Lake Elsinore area and enjoy volunteering their time to their local church. Follow Blake on Twitter @Fambro1