“Investing is about independence and empowerment,” says Marci McGregor, senior investment strategist in the Chief Investment Office for Merrill and Bank of America Private Bank.
That’s true for both men and women, of course. But for women — who tend to live longer than men — investing can provide a financial lifeline, especially as they face higher healthcare costs in retirement, notes Lorna Sabbia, head of Retirement & Personal Wealth Solutions for Bank of America.
All the more reason to celebrate this finding: “When women invest, they tend to have a better average annual return from their investments than men,” McGregor says. Several studies have shown that their portfolios outperform men’s by an average of up to 1.8% annually. That can have a major impact over time.
Here, McGregor and Sabbia point to some of the likely reasons for this performance difference and what we can learn from them.
Women tend to be patient investors.
They generally buy and hold for the long term. This approach requires fewer trades and so incurs fewer transactional fees, which can help to create better returns over time, McGregor notes.
Women generally aim for a more diversified asset allocation.
This balanced, more risk-averse investing approach, which doesn’t tilt heavily toward stocks versus bonds, or a certain market sector like technology, or load up on an individual stock, may help to preserve their portfolios when the markets get volatile. But, cautions McGregor, “being too conservative could cause investors to miss out on potential growth opportunities.”
They’re generally not afraid to ask questions.
Women tend to seek out information before investing. “It’s a process of drilling down and understanding what we’re investing in and why before we make a move,” notes McGregor. Women also tend to be more open to financial advice, she adds.
They tend to invest with goals in mind.
They’re investing for their families’ future security, a child’s or grandchild’s education, a dream vacation, or a home, rather than trying to outperform a market benchmark. “Having more immediate goals in mind can help investors stay focused and stick to their plan,” Sabbia says.
And women have one more advantage: their own longevity.
“Because women live longer than men, they have more time to invest — and that means more time to let their investments grow. Make longevity your best asset,” McGregor urges. Sabbia agrees, noting that a 2018 Merrill/Age Wave study, ”Women & Financial Wellness: Beyond the Bottom Line,” found that 41% of women wish they had invested more of their money.
“Don’t let yourself end up regretting you hadn’t invested more,” Sabbia says. Women often play catch-up as a result of the wage gap and caregiving responsibilities, which can limit their savings and investment opportunities. “That’s why it’s so important for women to invest early and often, and to stay focused on making the money they earn work hard for them.”
And that’s another piece of advice that all investors could benefit from.
For more information, contact Merrill Lynch Senior Consultant Kimberly Roth in the Missoula, Montana, office at 406.829.2467 or email@example.com.
Opinions and investment strategies referenced are subject to change.
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