Women and investing: Building financial intelligence to make empowered investment decisions

More women than ever are flexing their investment potential and taking proactive steps to meet their financial goals. In fact, according to a recent study, 60% of women in the U.S. currently invest in the stock market, up from 44% in 2018.

While this progress is welcome news, women’s investment account balances still fall behind men’s by as much as 44%. Plus, they face specific challenges in catching up — particularly in the form of the wage gap and the caregiver gap — and typically have a longer lifespan to plan and pay for.

All these factors make it especially important for women to continue to take charge of their financial futures by making the most of their investing potential.

Let’s explore how women tend to invest differently than men and five ways women can make empowered investment decisions. 

How women investors operate differently than men

Studies show that there are several trends that set women apart from men when it comes to investing:

• Women are more conservative investors. A study from Fidelity shows that women tend to be more conservative investors than men. They may also be less likely to jump on the bandwagon of newer investment trends such as cryptocurrency or other disruptors.
• Less confident. Though the number of women investing in the stock market is higher than ever, their confidence still lags. Fidelity’s study points out that 48% of women don’t feel confident in their investment knowledge.
• More patient. Women investors appear to be more patient than men, following the “buy and hold” strategy, which focuses on the long-term rather than short-term market movements. Case in point: Studies show that single women trade stocks 27% less frequently than single men.
• Less money to invest. While there have been great strides made toward closing the gender pay gap, there’s still a long way to go. Studies show that women continue to earn less and occupy fewer senior leadership positions than men, affecting the amount they’re able to save or invest.

The “caregiver gap” is also a major factor in a woman’s decreased investment power. Even if a woman works the same number of years and in the same role as a man, she will make an estimated $295,000 less on average over her lifetime. That is largely due to unpaid time spent caring for children and adults, such as aging parents. This figure is even higher for women of color.

Women and investing: 5 ways to make empowered investment decisions

Here are five steps you can take to build financial intelligence, feel more engaged with your finances and empowered in your investing decisions.

1. Know your financial goals.

Whether you’re saving for a home, a child’s college fund, retirement or all three, understanding your reasons is a powerful way to stay motivated to achieve your investment goals.

It may even be helpful to write down your goals and put them somewhere you can see each day to remind yourself of the bigger picture. Getting specific about what you want to achieve can help you make the most of the money you’re investing.

2. Understand your risk profile.

Figuring out your investment risk tolerance is a large part of making decisions you feel good about. While women tend to be more risk-averse on average, everyone has a unique set of factors that may influence their tolerance for risk. These include their age, their financial goals and their feelings about investing in general.

One approach isn’t better than the other; it’s all about what will keep you on track to meet your goals. Spend some time thinking about your own relationship to risk or consult with a financial professional to help you think this over. And remember: if you want a way to reduce risk overall, portfolio diversification is always a smart approach.

3. Seek out a financial professional.

You deserve to feel comfortable, confident and even excited about your financial future. If there are aspects of investing that you find intimidating or you’d like to learn more about, partner with a financial professional. Consulting with a third party can help you better understand your options and how to put together a portfolio that’s right for your financial goals.

When it’s time to meet, be clear when discussing what you want for your future. The more candidly you lay out your goals, the easier it will be for them to help you choose the best investments to generate the financial return you’re looking for.

4. Contribute as much as you can.

The answer to “When should I invest?” is usually right now. When it comes to how much to invest, aim for as much as possible, especially early on, to take advantage of compound growth and time in the market. (An important note, however, is that you should make sure you have an emergency fund and could do without the money you invest if needed.)

Maximizing 401(k) contributions is also a good way to make investing essentially automatic and particularly important to take advantage of if your company offers an employer match. Another way to make investing more seamless is to use a robo-advisor, which is a digital investment tool that uses algorithms to manage your investments on a day-to-day basis.

5. Make financial education a priority.

Surrounding yourself with apps, podcasts or other forms of media that focus on personal finance is a smart way to expand your investment knowledge. For example, you can use a finance-tracking app to help you manage your income, savings and investments. You can also follow “finfluencers” on social media for quick tips to help you find motivation as you work toward your investing goals.

Finding resources in the form of the media you enjoy most can make learning about investing fun and help boost your financial confidence.

Women and investing: Invest for a brighter future

Women have made significant strides in closing the investment gap, yet there’s still work to be done. By using these strategies for building financial intelligence and confidence, women investors can feel more empowered to reach their financial goals.

Want to start investing but not sure where to begin? Take this quiz, offered by U.S. Bancorp Investments, to learn about your investing choices.