This guide outlines what factors are holding millennial investing back, and how you can overcome them.
When it comes to finances and investing, men may still rule this sector, but women quietly achieve better results. If any generation had dominant feminist tendencies, that would be, the currently largest generation, the Millennials. Millennials grew up seeing women gaining power and influence. Moreover, they grew up around a lot of publicity around the gender pay gap.
Yet, the gender investment gap is rarely talked about. In fact, Geraldine Weiss is probably a person very few heard of, and one of the world’s most successful investors, especially since she tried hard to hide her gender back then in 1960. She started a financial advice newsletter under the name “G. Weiss” precisely so that her readers wouldn’t know whether she was a woman or a man.
Millennial investing for women: overview
Today, there are plenty of articles out there, lamenting that statistically, women are less likely to invest than men. Yet, several recent studies show that when women finally start investing their money, they outperform men when it comes to investment returns. For example, a study of millennial investing suggests that women investors can earn nearly 12% higher profits than their male counterparts when it comes to individual investments. So, milliennial women must understand that millennial investing isn’t just a man’s game anymore.
Many studies suggest that men and women have different habits when it comes to investing and finances, particularly when it comes to decision-making. Here are some of the main differences found by several studies on the differences between men and women investors:
Risk tolerance in millennial investing
According to a survey from BlackRock Investor Pulse, 72% of women reject investing their money when it comes to “riskier” equities, bonds, or real estate, compared to nearly 59% of their male counterparts. The same survey found out that 31% of women who decided not to make a riskier investment choose so because they feared that they would lose everything, whereas only 27% of men did so.
Moreover, a study from the Wells Fargo Investment Institute suggests that 16% of men identify as aggressive investors compared to just 4% of women who define the same. What does this mean? These data show that compared to men, women investors are more risk-conscious.
But that’s not all! On a flip coin, these data also show one of the reasons why many studies suggest that women investors often outperform their male counterparts.
Compared to women, men investors are more likely to feel overconfident in their investing skills and their ability to manage a portfolio. Unsurprisingly, this makes them susceptible to a false sense of control, which is a tendency for people to believe that they have control over outcomes more than they actually have in reality.
Why is this wrong? Theoretically, a riskier investment might bring you a higher return, yet, it may also lead to over-trading and higher transaction costs that dilute performance.
Moreover, it may also affect how millennial investing women and men respond to market swings because an overconfident investor may feel an extra urge to invest more in good times and sell more in bad times. But, we all know that panic buying or selling rarely brings the expected results to investors.
Type of investments
A study from the Warwick Business School tracked the performance of 2.800 investors, both men and women, for over three years. The study concluded that women investors achieved better results than man investors. Yet, according to the study, the fact that women outperformed their male counterparts can be attributed to the type of investment both genders tend to favor.
The study revealed significant differences between the two genders:
- Men investors are more likely to invest in opportunities like stocks that they believe have the potential to bring them significant returns very quickly. Plus, they tend to hold onto investments that seem to make them lose money, hoping that they will eventually come good.
- On the other hand, women investors have a more “slow and steady wins the race” type of approach. They are more likely to invest in funds that have a consistent record. Moreover, as women investors often held more diverse portfolios, the study concluded that they were typically less prone to experiencing losses.
In other words, the study revealed that female investors have a more long-term investment approach and perspective than men.
Female traders on the rise
The story of women slowly but steadily joining the investing game doesn’t end here. It seems like women are starting to conquer a new sector from the investment world, which only a couple of years ago was heavily dominated by men: the Forex market.
According to a latest data, more women are starting to trade online. In fact, the research shows that compared to 2017, when 1 in 10 online traders was female, as of 2018, 1 in 7 online traders are now women. Moreover, 59% of women traders prefer trading cryptocurrencies rather than traditional investment options, compared to 41% as it was in 2017.
Although there’s still a significant gender gap in the industry, female presence is growing in the forex market. Thanks to many brokers offering excellent support, such as the advantages of trading with ECN Forex brokers, even women who think they lack the knowledge and insight necessary to grow their money with trading can feel empowered to start building wealth.
It’s time to eliminate the myth that we’re engaging in a men’s space when joining the investing sector. Women need to start talking more about investing and building wealth because data shows strong evidence that we are capable of outperforming men and gaining high returns.
