Throw Like A Girl, Invest Like A Woman

April 22, 2021 | Lena Rizkallah, JD, CRPC®

When I was younger, I lived all year for the one week of vacation our family would spend in Ocean City, Maryland.  I was- and still am- crazy for the beach, alternating between jumping waves and laying perfectly still on my towel so all my melanin could multiply.  I loved walking the Ocean City Boardwalk, stuffing my face with salty fries doused in pungent vinegar followed by fistfuls of greasy, powdered funnel cake.  The t-shirt stores on the Boardwalk were the best—I would spend an hour just staring up at the wall displaying funny, ironic and raunchy decals ironed onto t-shirts and hoodies.

One summer, a particular t-shirt grabbed my attention; it was a cute baseball t-shirt with purple sleeves and the decal read “anything boys can do girls can do better.” I NEEDED it.  As an awkward 12-year old child of immigrants, I was failing miserably at navigating the treacherous world of suburban middle school, but this—this genius decal!—embodied the confidence I aspired to have in the mid-1980’s.  I spent my allowance on this T-shirt, and for the next 3 years (when I lost it at camp), I wore that shirt like it was my life’s message.   

As I’ve gotten older and had my share of experience in a world –and industry–still dominated by men, I’ve come to realize that this motto is not entirely accurate.  In an era in which society is beginning to embrace individuality, it’s not that women do things better than men, but more so that women do things differently.  This is especially true when it comes to investing.

We are all familiar with the data: countless studies have shown that women tend to be less confident about their investing abilities, and one reason for this is the inequality women experience when it comes to learning about the financial planning process.

In addition, there remains a wide gap between women and men’s earning power.  For every dollar that a man earns on average, a woman earns about 82 cents.  There are many reasons for the gender gap: women spend less time in the workplace on average than men because of childbirth and raising children, and they tend to be the caretakers for older adults like parents or in-laws (according to a Bank of America study, about 80% of women have children and 2/3 of caretakers of adults are women).  A career interruption can have a devastating effect on earning power, which could hamper a woman’s ability to save towards her retirement, to invest in the market and could reduce her Social Security benefit.

Fortunately, more women of all generations are educating themselves on finance and/or are working with a financial advisor, and take a very active, inquisitive, and bold approach which lends itself to building confidence.

1. Knowledge is power.  Women are more likely to say, “I don’t know but I want to understand.”  

At our first meeting, many of my female clients will admit to me “I have no idea what I’m doing!” and then will begin hammering me with questions.  As the financial advisor, I have come out of meetings exhausted and sweaty from answering questions about the market, the economy, investing, fees, the planning process, my background—and that’s a GOOD thing!! Once these clients make the decision to start investing, they also begin educating themselves—reading and learning about the process and making investing in the market a topic of conversation– which is key to building confidence.

2. Women invest for the long term and trade less often – but that doesn’t mean they are risk averse. 

Research shows that the more you trade, the higher the likelihood of losses.  A 2000 study on trading behaviors concluded that male traders tended to be overconfident and as a result traded 45% more than women.  Trading reduced men’s returns by 2.65% a year while women who traded reduced their investment by an average of 1.72%.  On the other hand, taking risk off the table at the wrong time could also lead to lower returns.  Leading up to the pandemic-induced market downturn last March, “research by online wealth manager Nutmeg found that…men on the platform were 56% more likely than women to reduce risk in their portfolios during the sell-off, and almost twice as likely to withdraw their money. Ninety-five per cent of women made no adjustments to their accounts.”  In a nutshell: women stayed invested as the market dropped and ended up with fewer losses.

3. It’s never too late.

Practically every client I work with has admitted that she wishes she started saving in her twenties.  Of course, in our twenties we were studying or working or having babies or paying off debt or just busy being young—and saving was not the biggest priority.  Usually, a life event drives women to me; divorce, death of a spouse, desire to start a business, a big work promotion, an inheritance.  While some clients may have started late, once they understand the benefits of organizing their finances, consolidating accounts, and investing, they feel empowered and motivated to keep this process going.

4. Women tend to save/spend more with the big picture in mind.

Historically, women tend to be the family caretakers, and this role extends to where she puts her money.  Studies show that women will spend their money first on their children or necessities for their family before spending on themselves.  Clients who engage in the planning process understand how to subtly shift priorities; they understand the overall benefits of ‘paying yourself first’ (i.e., saving and investing) and how it may extend to benefit the family.

As life changes and wealth increases, it becomes more crucial for clients-regardless of gender– to get involved in the financial planning process.  There is no one ‘right’ way to approach investing, but education, confidence and staying engaged in the process are key.  Setting financial goals is important but as the King of Burgers says, ‘have it your way’ and enjoy the ride.