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May 5, 2020

Invest Like a Woman, Starting Today

Combine those longer-term goals with a woman’s general temperament and you have the ideal formula for better investing.

Here are 5 things women do differently that you can too:

  1. Women tend to be more thorough “Several studies, including a national survey by LPL Financial, show that women tend to research investments in depth before making portfolio decisions,” writes Nelli Oster, an investment strategist for an asset management firm, Blackrock. They also take more time to make decisions, whereas men can be more impulsive.
  1. Women trade less. The Wall Street Journal reported that in 2014, according to Vanguard, 11% of men traded among mutual funds in their accounts, compared with 7% of women. Generally, the more you trade, the more you lose. When you trade, you pay transaction costs, and those costs alone can swallow up a chunk of your portfolio.
  1. Women stay the course, even when the market dips. Women are better at sticking with their long-term financial plans than men. They “buy and hold” their investments even when the stock market seesaws, which research has shown can lead to significantly better returns. Women are more focused on comprehensive financial planning, while men, who are more competitive by nature, tend to focus on the track record of investment returns, according to a Fidelity study.
  1. Women choose safer investments. Women are better at balancing their portfolios using a mix of stocks, bonds, and other investments, and are less apt than men to put their entire portfolio into stocks. Fidelity found women’s returns to be about 1% to 2% higher than men and with much lower risk. They are also more inclined than men to take advantage of the additional catch-up contributions allowed in their retirement funds once they turn 50.
  1. Women like to invest in causes they care about. Once their own financial needs are met, women like to invest in ways that help make a positive impact in the world. CTI research found that 79 percent of women surveyed in the U.S. want to invest in organizations that promote social well-being, whether it means helping to fund start-ups, social organizations, and schools, or investing in companies that promote clean energy or diversity.
    While the type of returns you might get can vary wildly with socially-conscious investing, experts say it’s possible to get better returns. One reason may be that feeling more connected to a meaningful investment may help you stay the course in a turbulent market. For more on socially conscious investing, see my article “Doing Well By Doing Good; How to Match Your Investments With Your Values.”
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