Last month, I had the honor of participating in a dynamic podcast discussion with two fellow women in investing, Jane Barratt, who serves as chief advocacy officer of the fintech MX, and Meredith Jones, author of “Women of The Street: Why Female Money Managers Generate Higher Returns”.
Our conversation, hosted by YieldStreet on 21 April, explores some of the major misconceptions about women and investing.
What follows are excerpts from our discussion, reprinted with YieldStreet’s permission.
Key Points:
- Women are confident and competent investors, despite often downplaying their skills.
- Rather than being risk-averse, women are risk-aware and make calculated investment decisions.
- Multiple studies have shown that women outperform men in investing and are financially literate.
- Women are interested in investing but prefer a more relatable and grounded approach.
- Education and exposure are crucial in promoting financial literacy among women.
Myth 1: Women Are Not Confident as Investors
Barbara Stewart, CFA: Despite their financial education and capabilities, many women tend to downplay their investing skills when asked about their confidence. This self-deprecating behavior is a common issue that needs to be addressed. However, confidence should not be the sole focus when evaluating investment competence. Numerous studies have shown that women are indeed competent investors and have consistently delivered strong results.
Jane Barratt: The lack of confidence often attributed to women can be seen as an unfair benchmark. Perhaps the problem lies in the overconfidence of men in the investing world. Women’s measured and cautious approach to investing should be seen as a strength rather than a weakness.
Meredith Jones: Overconfidence can actually lead to poor investment decisions, as seen in studies that show men tend to trade more frequently due to their belief that every decision they make is a good one. Women’s awareness of their own limitations and thorough research process can contribute to better investment outcomes.
Myth 2: Women Are Risk Averse
Stewart: Women are not risk averse; they are risk aware. This reframing is important, as it recognizes the positive aspect of being aware of risks and making calculated investment decisions. Advising women to avoid risk by sticking to short-term bonds and cash equivalents is a disservice, as it hinders their potential for long-term financial growth.
Jones: Studies have shown that men and women weigh probabilities differently, with men often having outsized expectations. Matching expectations with reality can result in a more consistent and less risky investment approach. Women’s meticulousness in assessing risks is an advantage that should be acknowledged.
Myth 3: Women Are Not Good Investors
Stewart: Countless studies and research have proven that women are, in fact, good investors. From outperforming men in stock investments to generating higher returns, women have consistently demonstrated their investment prowess.
Jones: It is crucial to move away from the outdated idea that women are not good investors. With women controlling a significant portion of investable wealth and the increasing transfer of generational wealth to them, it is essential to recognize and empower women as successful investors.
Myth 4: Women Are Not Financially Literate
Stewart: The notion that women are less financially literate is misleading. Studies have shown that women may be more inclined to respond “don’t know” when surveyed, indicating a willingness to seek assistance or a lack of overconfidence. When the “don’t know” responses are removed, the gender gap in financial literacy narrows significantly.
Barratt: Financial education and exposure play a significant role in promoting financial literacy among women. By providing accessible platforms for learning and practicing investment skills, women can develop the necessary confidence to make informed financial decisions.
Myth 5: Women Are Not Interested in Investing
Stewart: Contrary to popular belief, women are interested in investing. However, the traditional communication style of the investment industry, filled with charts and graphs, may not resonate with many women. Women prefer a more relatable approach that highlights the impact of investments on their families and lifestyles.
Barratt: The investment industry has often ignored women and failed to cater to their needs. By adopting a more inclusive and relatable approach to investing, the industry can engage and empower women as active investors.
If you have any doubts or questions, please let me know.
