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Surprise! Women Are Better Investors Than Men. Here's Why

Motley Fool - Tue Apr 16, 12:00PM CDT

A young adult tracks and trades stocks on a computer.

Image source: Getty Images

If I asked you to tell me what a successful investor looks like, would you describe a woman? Or would your mind immediately go to the type of people you see on TV -- most often white and male? Well, the data is in, and as it turns out, women are better investors than men. Let's take a closer look at research about women and investing (helpfully compiled by our friends at The Motley Fool), and see how women can get started in the investing space.

Women have the edge

A 2021 Fidelity study found that women outperform men in investment returns by 0.4%, and an old study from UC Berkeley found that gap was nearly 1%. Wells Fargo data added more weight, showing that we earn higher returns on our investments while managing risk more effectively -- the difference in returns between individual investment accounts owned by women vs. men was 0.12%.

What accounts for these differences? Well, that same Wells Fargo study noted that more women identify as conservative or moderate investors than men -- who were more likely to be aggressive investors (55%). Noted voices in the investing space have spoken about women's predisposition to approach the newest investments (like cryptocurrencies) or riskier options (speculative stocks) with a lot more caution. Finally, we also approach market volatility with a calmer reaction -- Fidelity's study determined that 51% of us will wait out any market hiccups, vs. 43% of men.

These qualities make us more successful investors -- when we actually have the money and ability to invest. Unfortunately, the news isn't all good, due to women's weaker financial standing overall.

Wanna be an investor?

Thanks to the persistent gender pay gap, women have less money to invest. The gap is slowly shrinking; new data released by the U.S. Census showed that the average is now $0.84 for women for every $1 earned by men (the gap is larger for women of color). And the gap also widens when you include seasonal and part-time workers -- they earn an average of just $0.78 per $1. A 2021 Vanguard study found that the median retirement account balance among women was just $31,291, vs. $45,106 for men -- a difference of 44%.

To add insult to injury, women are also less confident in our investment and money management skills. I'm convinced that a lot of this is social conditioning -- when you don't see people like yourself talking about investing, you might assume it isn't for you. Well, that's not the case! If you're new to investing, you're not alone -- here are a few moves to consider as you dip your toes:

  • Research brokerage options: Good news, you're already in the right place for this step. Check out The Ascent's reviews of the best online brokers for beginners to see which might be a fit for you. As a bonus, these brokers won't bury you with fees.
  • Keep it simple: While you can buy shares of varied individual stocks, that isn't the only way to grow your money. Consider putting money into ETFs, or exchange-traded funds -- these are sort of like baskets of different stocks across market sectors or even the whole market. They're a good way to instantly diversify your portfolio.
  • Commit for the long term: Investing is best done over a long period -- day trading isn't a great idea. The S&P 500's average annual return over the last 50 years is 10%, but individual years can see wild swings.
  • Minimize risk: If you're interested in, say, cryptocurrencies, keep your holdings to 5% or less of your portfolio. Keep the bulk of your money in boring, predictably successful investments (like those ETFs we discussed above).

Investing is for everyone, and if you approach it with knowledge, strategy, and an eye toward the long term, you're more likely to come out ahead. Why not get started today?

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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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