Looking to make sound investments? A female advisor may be a great choice. Studies show that the way in which women approach investing often leads to improved performance. Why is this? Biology and psychology play important factors in how women advisors succeed. Yet, female advisors and fund managers are under-represented in the investment world. Despite being half the population, women exclusively manage approximately 2% of the industry’s assets and open-end mutual funds. And, only 17% of Chartered Financial Analyst® (CFA) and 23% of Certified Financial Planner® (CFP) designations in the United States are held by women.
Today, women are becoming much more involved in financial decision making, and have proven themselves to be very successful when it comes to investing.
Why are women successful investors?
- Women save more. Women tend to be diligent savers and that diligence amounts to thousands of dollars of additional wealth over the course of a lifetime.
- Biology plays a role. Women are generally more risk averse. They take less investment risk and trade their portfolios less frequently. Less trading typically leads to better performance.
- Psychology and emotions play a role as well. Women characteristically exhibit less overconfidence. They take fewer risks, are less apt to hold onto losses, and are more likely to seek other opinions about an investment or to accept evidence that refutes their beliefs. Women tend to analyze and gather more information before making a decision. Women are also more likely to recognize and acknowledge when they don’t know something and to not invest in something until they have done adequate research.
So, what lessons can we learn from the successful female investors when it comes to investing your money?
- Ask questions, develop a plan, and stick to it. Having a plan makes it harder to be impulsive.
- Don’t fall into the typical behavioral finance traps discussed in our previous blog, “The Ten Commandments of Investing.” Do your homework, remove emotion from the equation, and consider all information even if it doesn’t support your beliefs. Dabble less in your portfolio. Remember, “Don’t confuse activity with achievement.” Resist the need to trade and “fix” your investments.
- Be patient – if you’re invested for the long-term, there’s no need to monitor your investment portfolio on a daily basis.
BDF is deeply committed to serving the unique needs of our female clients and in growing our female talent. Our Women’s Service Team focuses exclusively on the financial planning and investment needs of divorced, widowed, and professional women. We are ahead of the curve having three female owners and women represented at all levels of client service. And, we are actively recruiting more to join our team.
Matthew S. Reznik, CPA, MBA, CFP®, CFA is a Wealth Manager at BDF. As a member of the Investment Committee, he is instrumental in developing BDF’s overall investment strategy. Matt also enjoys writing and is responsible for much of BDF’s client correspondence. Matt received his Bachelor of Science in Economics with concentrations in accounting and finance from the Wharton School of the University of Pennsylvania and his MBA in finance and strategic management from the University of Chicago Booth School of Business. He is a member of the American Institute of Certified Public Accountants, the CFA Institute, and the CFA Society of Chicago.