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Money Matters


By MARY LYNNE DAHL , Certified Financial Planner ™ Retired


January 23, 2022
Sunday AM


jpg Money Matters by Mary Lynn Dahl

Mary Lynn Dahl

(SitNews) Ketchikan, Alaska - As a long-time Certified Financial Planner® (recently retired), I have worked with a lot of clients, both male and female, which has given me the opportunity to observe in great detail a very private subject that often provokes lively discussions, to put it mildly. That subject is money, spending it and investing it in particular. If you are in a relationship as a couple, it should be discussed. If you are a single person, you can consider the information to the extent that it may impact how you invest, with the potential to help you to get better outcomes with your portfolio.

Discussions about money get lively because money is a private topic to most people and talking about it can trigger a lot of emotion. This is no surprise to most people. So, if you ask the question “Who are better investors, men or women?” you will probably get a very definite opinion, regardless of the opinion given. The place to get the answer is by looking at the research done by those firms whose business it is to know. After all, investment firms and data collection firms need to know how to get investor customers in order to sell their products and services to those customers, both male and female, so they have done a lot of studies on the subject.

These studies have solid evidence from a ton of research, and the results are in. According to all of the research done over the last 25 years, women are better investors than men overall. Male or female, you may say “What?” or “Really?” Regardless of your reaction, read on to find out what evidence there is to reach this conclusion, over and over again, and what it means for you as an investor.

Women of the past generations paid attention to financial matters to the extent that it impacted the home and family, such as spending for food, children and the household, but generally did not show a strong interest in stocks, bonds, markets, real estate, business and investments. It was cultural, to a large extent. Today, however, with so many women working full time, that has changed dramatically. Women today have to negotiate salaries, bonuses, and deals on the job. They have retirement plan contributions to make and choices on how to invest, medical plans to choose from and benefits to select, all of which require making important financial decisions.

Women may be better investors, but they still have the problem of a gender gap when it comes to salaries. On average women in 2020 earned 20% of what men earned. Over a lifetime of earning an income, women will earn over a million dollars less than men for the same number of working years. This fact means that with less income earned, they had less money to invest. Thus, women tend to end up with lower account balances in retirement plans, but they have gotten better investment returns on those invested dollars when compared to men.

In addition, almost 40% of women will give up working or take time off from careers to care for their families, including elderly parents, so they forfeit earned income that could be invested in retirement plans and investment portfolios, putting women at a disadvantage. Further, women who get out of the workforce to care for children or aging parents will not be credited with contributions to their Social Security account for those years while out of the workforce, which of course results in lower Social Security income benefits at retirement age.

Women are, on average, late to the investment arena. They have not participated at the rate than men have participate, largely out of fear of stocks in particular. According to research done by Wells Fargo, only 4% of women say they are comfortable with a lot of risk and 56% of millennial women admit that the reason they do not invest is that they are afraid of stocks. However, although women have not invested as much as men, they are better at saving than men and this has helped them get better returns than men because they are disciplined about it. When it comes to contributions to a retirement plan, women save 9% of their paycheck compared to men, who save 8.6%, according to surveys done by Fidelity Research.

According to the research, the average woman keeps 68% of her money in cash, such as savings account and certificates of deposit or bonds. These conservative investments have historically earned less than stocks over the last 30 years. In fact, since 1926, the stock market has averaged 10% and for the last 30 years the S&P 500 (US 500 biggest companies) has earned an annual average return of 10.72 %. Bonds, however, have earned an average annual return of only 5-6% since 1926 and about 3.5% for the last 30 years. With women investors keeping so much in cash and slightly less than 35% of their money in stocks, the fact that women have still outperformed men as indicates that they are doing a lot of other things right.

In fact, in 2017, Fidelity Funds reported that for the years 1991-1997, women outperformed men by 0.4%. That may seem like a small difference, but when you compound it over decades, it makes a very big difference in results. Fidelity was not alone in their analysis of gender- based portfolio returns. Data accumulated by the firm Openfolio agreed, saying that they found that women outperformed men in 2014, 2015 and 2016, during a difficult and volatile market period, particularly 2015, a year in which a lot of people saw their portfolios drop in value. According to Openfolio, on average, men lost 3.8% in portfolio value while women only lost 2.5% in portfolio value. Again, on a repeated basis, these larger gains and smaller losses add up. The University of California has been keeping records of 35,000 investment accounts and found over a 6-year period of time in the 1990s that women outperformed men by 1%.

What exactly are women doing to get better returns, especially if they are so hesitant to put more of their money into stocks rather than safeguard it as cash or bonds? Think about it. The answer goes back to behavior rather than anything else. Women behave differently about investing than men. So, what kind of different behavior is involved?

It seems that in spite of their admitted fear of stocks and their tendency to be too conservative, women have done well for behavior reasons that might be surprising to some people.

Women have the advantage of being more disciplined than men when it comes to investing. And this is the key; discipline. If you have read other articles I have written, such as the many articles published in Sitnews, you will recall that I have said repeatedly that the most important key to becoming a successful investor is to become disciplined at it. Have a plan, stick to it and be patient has been my advice for over 35 years, and this is the #1 key to investment success. Women have this characteristic and it has worked well, in spite of a lot of disadvantages and fear of the stock market.

Today, more women than men are graduating from college, many of whom are getting degrees in disciplines that require a level of financial sophistication that was not typical in the past. All of these changes have made a difference in the skills required to be a successful investor. These facts have made women better at investing than in the past, which is no surprise to most people. But, does that make them better at investing then men, on average? Let’s look at the research on the subject to see what evidence there is on this question.

All of the studies done by reliable sources have come to basically the same conclusion that women are better investors than men on average. One of the most recent research studies, compiled by Fidelity Funds, found that on average, women investors achieved a 0.4% better annual returns than men according to their own records of 5.2 million accounts from January 2011 to December 30 2020. That may not seem like a lot, but over 9 years, it really adds up, because it is almost a half of a percent and it compounds (receives earnings on earnings/interest on interest).

In the same 2021 research study done by Fidelity, they found that 47% of women report having $20,000 more accumulated in investment accounts than men, 31% have $50,000 more than men and 18% have more than $100,000 more than men. This is meaningful in light of the fact that women on average still earn 80% of what men earn, take more time off to raise children and care for aging parents and do not contribute to retirement plans while not working, all of which makes it harder for women to even accumulate the same as men, much less more than men.

According to Motley Fool, a highly respected financial publisher, women have earned up to 1% more than men over time on their investments than men have. This is very significant. Money that compounds monthly doubles at 7% in just 10 years. $50,000 grows to a value of $100,000. In 20 years at 7% compounded monthly, your $50,000 will have grown to a value of $200,000. In 30 years, it will be worth $400,00 at a monthly compounded return of 7%.

If you increase that monthly compound return by 1% to 8% per year, $50,000 grows to a value of $110,390 in 10 years. At 8% compounded monthly, $50,000 will grow to a value of $243,720 in 20 years and in 30 years it will have grown to $583,088. Over 30 years of investment, by getting 8% instead of 7% an investor ends up with an increase in value of more than $183,000. That is powerful and due only a difference of 1%. This is the confirmed track record of women and it is evidence that is hard to argue with.

The behavioral differences in how the sexes make investment decisions and choice shows that men make some crucial mistakes that women do not generally make, and that is the difference in the long-term average results of both. Most of the behavioral differences are rooted in the discipline that good investment success requires. The New York Times journalist Ron Lieber explained it in his article titled “Women May Be Better Investors Than Men. Let Me Mansplain Why”, published October 9. 2021. He wrote in this article that “Overconfidence is bad and women are less likely to fall victim to it.” In fact, a report from FINRA, the US regulatory agency over registered financial advisors and brokers said that when surveyed, 71% of men claim that they have a high level of investment expertise but only 34% of women believe that they have a high level of investment expertise. In his article, Mr. Lieber refers to a lot of research and key statistics from reputable sources that indicate that over time, women get better investments returns because they behave differently.

So, what are those behaviors that women exhibit in their methods of investing which men do not exhibit?

To answer the question, here is a list of those behaviors:

Women tend to do more research when making an investment decision.
Women tend to be more patient as investors.
Women are not egocentric about investing; they are more pragmatic.
Women are not overly confident in their own skills at investing.
Women take less risk, and they prefer moderate risk as opposed to aggressive risk.
Women tend to be planners with their money, especially with invested money and
Women hire professional advisors like certified financial planners rather than stock broker-salesmen to get their financial advice.
Women do not chase “hot tips” and
Women trade less frequently than men, showing a preference to follow a disciplined plan rather than invest impulsively.
Once they have a plan, women tend to stick with it and stay the course.

Men, on the other hand, are more impulsive than women and have been shown to follow “hot tips”.
Men spend less time researching potential investments.
Men trade 45% more often than women (which is costly in fees and taxes on short term capital gains) and
Men exhibit less patience than women.
Men change strategies and alter the plan rather than sticking with it consistently.
Men clearly take more risks, and
Men exhibit overconfidence in their ability to make investment decisions.
Men get advice from stock broker salesmen much of the time, or from other overconfident men.
Men do not get advice from professional financial planners as often as women (but fortunately for them that is changing).

Those are the main behavioral differences between how men and women invest. If you think about it, it is easy to understand how one behavior can be beneficial but the opposite behavior will be damaging.

While women have done very well in recent decades compared to men as investors, they need to become even more assertive in how they invest. Knowing that long term, the stock market will most likely outperform bonds and cash by a very large percentage, women should not be afraid to invest larger percentages of their money in stocks. Given that women are so patient and willing to plan, then stick with the plan, they have the ability to take more risk, going from conservative in general to moderate in general. Men can learn from this advice by taking less risk if they see that they are creating too much of it in their investment behaviors. Men can plan, too. Men can stick with the plan if they choose to. Men can give up chasing hot tips and wingnut investment schemes. Men can adopt a moderate, middle of the road investment strategy and work with a Certified Financial Planner® whose main job is to keep them on track and disciplined.

I congratulate all the women who have become active investors, doing research, taking the time to plan and meet with a competent professional financial planner. I advise them to think about taking a little more risk if appropriate for their situation and I hope this is an encouragement to both men and women to avoid the mistakes I have listed here and adopt the behavior I have listed as desirable for good investment results. Have a frank talk with self and get started on better returns on your invested money. Most of us will live a longer life than we anticipate, so we need to take this seriously and get busy at being better investors starting in 2022.

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©2022 Mary Lynne Dahl, CFP®

Mary Lynne Dahl is a retired Certified Financial Planner  TM . She is a partner and founder of Otter Creek Partners, a fee-only financial planning and investment advisor firm in Alaska. These articles are generic in nature and are accepted general guidelines for investment or financial planning and are intended for educational and financial literacy purposes only.  

Mary Lynn Dahl can be reached at

 Representations of fact and opinions in comments posted are solely those of the individual posters and do not represent the opinions of Sitnews.



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