What We All Can Learn from Women Investors

Compare your investing style with these insights.

What We All Can Learn from Women Investors image

“INVESTING IS ABOUT INDEPENDENCE and empowerment,” says Marci McGregor, managing director and senior investment strategist in the Chief Investment Office for Merrill and Bank of America Private Bank.

That’s true for both men and women, of course. But for women—who tend to live longer than men—investing can provide a financial lifeline, especially as they face higher health-care costs in retirement, notes Lorna Sabbia, head of Retirement & Personal Wealth Solutions for Bank of America.

All the more reason to celebrate this finding: “When women invest, they tend to have a better average annual return from their investments than men,” McGregor says. Several studies have shown that their portfolios outperform men’s by an average of anywhere from 0.4% to 1.8% annually.1 That may not seem like much, notes McGregor, but it can have a major impact over time.

Header of the graphic is Lessons from Women Investors. Graphic contains paragraphs describing four lessons, which are surrounded by images. The image to the left of the first paragraph is of a calendar graphic on a tablet device. The first paragraph contains the title, Stick to a Strategy. Text below it reads, Invest for the long term, rather than engage in short-term or day trading, so you’ll pay fewer transactional fees. The image to the right of the second paragraph is of a bull’s-eye with three arrows in the center. The second paragraph contains the title, Shoot for Goals. Text below it reads, Invest with a goal in mind, which can help you craft a strategy you believe in, and stay the course once you’ve put it in place. The image to the left of the third paragraph is of a three-dimensional pie chart with one section sticking out. The third paragraph contains the title, Balance Risk and Reward. Text below it reads, Choose allocations carefully—and don’t build more risk into your portfolio than you’re comfortable with—so you can stay the course when markets get volatile. The image to the right of the fourth paragraph is of a stack of prospectuses. The fourth paragraph contains the title, Seek Guidance. Text below it reads, Ask questions and seek guidance—overconfidence can work against you, so gather all the information you need to make the right decisions.

Here, McGregor and Sabbia point to some of the likely reasons for this performance difference1—and what we can learn from them.

"Because women tend to live longer than men, they have more time to invest—and that means more time to let their investments grow. Make longevity your best asset."
—Marci McGregor,
managing director and senior investment strategist, Chief Investment Office, Merrill and Bank of America Private Bank

Women tend to be patient investors. They generally develop a strategy and stick to it, buying and holding for the long term, rather than buying and selling reactively, or day trading. This “steady as she goes” approach requires fewer trades and so incurs fewer transactional fees, which can help to create better returns over time, McGregor notes.

Women tend to favor a balanced investing approach. They generally aim for a more diversified asset allocation—not one that tilts heavily toward stocks versus bonds or a certain market sector like technology, or loads up on an individual stock, McGregor observes. This more balanced, risk-averse approach may help to preserve their portfolios when the markets get volatile. But, cautions McGregor, “being too conservative could cause investors to miss out on potential growth opportunities.”

Women are generally not afraid to ask questions. They tend to seek out information before investing. “It’s a process of drilling down and understanding what we’re investing in and why before we make a move,” notes McGregor. Women also tend to be more open to advice, whether it’s from a professional or through a financial mentor, she adds.

Women tend to invest with goals in mind. They’re investing for their family’s future security, a child’s or grandchild’s education, a dream vacation or a first or second home, rather than trying to outperform a market benchmark. “Having more immediate goals in mind can help investors stay focused and stick to their plan,” Sabbia says.

And women have one more advantage: They can make their own longevity an asset. “Because women live longer than men, they have more time to invest—and that means more time to let their investments grow. Make longevity your best asset,” McGregor urges. Sabbia agrees, noting that a 2018 Merrill/Age Wave study, Women & Financial Wellness: Beyond the Bottom Line, found that 41% of women wish they had invested more of their money.

“Don’t let yourself end up regretting you hadn’t invested more,” Sabbia says. Women often play catch up as a result of the wage gap and caregiving responsibilities, which can limit their savings and investment opportunities. “That’s why it’s so important for women to invest early and often, and to stay focused on making the money they earn work hard for them.”

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1 Reuters, “Why women are better investors: study,” 2017; Warwick Business School, “Are women better investors than men?” 2018.

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management (“GWIM”) clients, is part of the Investment Solutions Group (“ISG”) of GWIM, a division of Bank of America Corporation (“BofA Corp.”).

Bank of America is a marketing name for the Retirement Services business of BofA Corp.

Opinions and investment strategies referenced are subject to change.

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