Author: Christine Giordano
Women have different strengths when it comes to investing. Although they may make less money, they tend to save a bigger percentage of their income – 8.3 percent versus 7.9 percent for men, according to research by Fidelity Investments. And although men may take more risks with investments, women can focus on paying lower fees, making socially conscious investments and shoring up for rainy days. Here are a few targeted tips.
Do what you can to learn about investing now, because estimates show that women control 51 percent of wealth in the U.S. and are projected to control two-thirds by 2020, according to a Fidelity study. Yet women are more likely to say that “lack of investing knowledge or experience” and “too much information, or complexity of investing” are reasons they feel less confident, according to a Capital One investing survey. Consider taking an online investing course, downloading a podcast or wading through a book (“The Intelligent Investor” by Warren Buffet).
Don’t wait for Prince Charming
Regardless of relationship status, women believe that somehow, Prince Charming will arrange for their financial security in their golden years, according to a study by Satoshi P. Watanabe of Hiroshima University. This reduces their drive to proactively control their financial future and often puts them in vulnerable situations. According to the study, it “compounds the disadvantages that women already face when building their retirement savings: women are paid less than men and often work fewer years, due to taking time out of the workforce for child-rearing. Additionally, women usually have longer retirements because they have longer average life expectancies than men.”
Learn at work
Although many employers offer financial workshops and guidance through their 401(k) or 403(b) providers, 65 percent of women are not utilizing these resources, according to a study by Fidelity. See if your workplace hosts workshops or one-on-one appointments or contact your 401(k) providers directly.
Invest to improve the world
“A lot more women are interested in socially responsible or impact investing,” says Jennifer Ellison, principal of Bingham, Osborn & Scarborough, a high net-worth wealth management firm in San Francisco. The price to research and develop funds focused on socially responsible or impact investing has decreased” and the returns, over the long run, are pretty comparable” to regular ones, she says. People either choose to avoid certain products in their portfolios or invest in causes they care about. Two of her favorite mutual funds are TIAA-CREF Social Choice Equity (ticker: TISCX) and the Vanguard FTSE Social Index (VFTSX).
Look for public companies with female leadership
“Statistics have shown that publicly traded companies with a greater number of women on their board have historically performed better,” says Nancy Osmond Popovich, managing director of investments at The Wise Investor Group at Robert W. Baird & Co. in Reston, Virginia. She cites September research from Grant Thornton that found companies with at least one woman on their boards outperformed rivals by 1.91 percent in the Standard & Poor’s 500 index.
Immunize your lifestyle
Women tend to protect their nests as well as their nest eggs. In being more risk-averse, women like to immunize their lifestyle so assets provide enough money to meet needs for themselves and their families, says Nikki Michelini, director of wealth management and principal at Aspiriant, a financial advisory in Los Angeles. If this is you, pick a healthy dose of fixed-income, or less-volatile assets in your portfolio to cover those needs, Michelini says. You’ll likely become more aggressive with investments in situations where there is clearly an excess of assets to support your needs, or if the assets are for the benefit of charity or future generations.
Choose an advisor you trust
Women may ask more investment questions, but once they decide, they tend to stay the course without switching investments to improve returns. In doing so, they can benefit from fewer fees and a slightly higher return on investment, according to research by Michael Liersch, head of behavioral finance at Merrill Lynch Wealth Management. “I think they’re more likely to stick to an investment strategy as long as they understand it and believe in it,” Michelini says. “Trust in their advisor is key though, as is the advisor’s ability to effectively communicate and reinforce the strategy.”
Insurance can often be used to create a rainy-day fund and women often lead the discussion on insuring the family, says Winnie Sun, managing director of the Sun Group Wealth Partners. “Whether it be life insurance or long-term care, they want to make sure loved ones are protected. This makes particularly smart sense considering women live longer, and are more often caregivers to elderly parents and children.” When choosing, consider how much you’ll really need, and don’t overbuy. Choose a highly rated insurer, a premium that is comfortable and shop around to get the best policy, Sun says.
Know if your family has an estate plan, who will inherit your home, where important documents are kept and how much it takes to maintain your lifestyle, says Penny W. Gordon, senior vice president and private wealth advisor at Gibraltar Private Bank & Trust in Miami. “If you’re not already explicitly involved (in financial meetings), let your spouse or partner know you’re interested in learning more about managing money and ask to be included. … By participating in account reviews, you’re not only learning more about your family’s big-picture finances, but you’re also signaling to your advisor that you wish to be included in communications.”
Think long term
Women tend to focus on the long-term goals of their portfolios and associate their wealth with goals, such as retirement homes or college savings, says Laurie Haelen, senior vice president and managing director for Tompkins Financial Advisors in New York. Have a professionally managed strategy with clearly defined goals that are revisited at least annually and measure it against your own benchmarks, Haelen says. For retired female investors, having a clearly defined income stream from the portfolio to replace your paycheck is also appealing.