Luck Be a Lady? Hardly – 5 Characteristics of Successful Women Investors

Photo Credit: Michelle Citrin Studios

By Laura A. Webb CFP®, President, Founder and CEO of Webb Investment Services, Inc.

Luck plays no role in why women succeed as investors when they exercise well-informed influence over how and where they invest their wealth. Contrary to skeptics who equate investing in the stock, bond, or money markets as gambling, a wise and prudent investor manages the appropriate level of risk they are willing to accept. The most successful investment decisions are data and value-based – not capricious whims or hopeful – intuitions.

If I could design the ideal investor, she would, over her saving and investing years, develop five characteristics I have observed in the women I advise in my practice – Resilience, Risk Awareness, Patience, Discipline, and Confidence. Understand that these characteristics are acquired over time and not required at the onset of a woman’s journey to build a nest egg for her later years.

Resilience

Despite the obstacles women face as they work to accumulate wealth for a comfortable retirement (lower lifetime wages, lost income due to raising and caring for children and diminished Social Security benefits at retirement) my experience shows women prove to be remarkably resilient and astute in their investment decisions with the money they do save.

Risk-Awareness

Women who consult with experienced investors and build their knowledge base learn to appropriately match their investment portfolios to their risk tolerance and time horizon. They understand the concept of diversification, not placing all their eggs in one basket, and how that strategy benefits them over the long-term.  

Absent sound advice and education about investing, women tend to choose rather conservative investment options, such as cash, money market accounts, treasury bills and certificates of deposit. However, a more diversified portfolio holds the potential for greater returns.

Patience

We’re told patience is a virtue. That is especially true in investing where patience means understanding the cyclical nature of the inevitable ups and downs of financial markets due to recessions and unexpected events, such as a global pandemic.

Women know, or have learned, that these swings in the market level out over time. So, they stay the course on how they’ve invested their money. Women avoid potentially permanent losses during a down market phase when they resist the temptation to make radical adjustments such as pulling their money out entirely, or liquidating. This helps explain why women check their investment account status less frequently than men do. They’re patient and measured with their investment decisions. They take the steps through advice and education to equip themselves with the tools to make wise investment decisions. Women succeed as investors when they appropriately match their investment choices with their needs and risk tolerance.

The recession of 2008 taught all of us a valuable investment lesson. Those who had the advice and education focused on their investment time horizon concluded the likelihood of an economic rebound was worth staying the course and staying with their allocations. Informed and well-advised women reconcile the personal and emotional side of money with the technical, data-based side to reach their comfort zone. These investors recovered more quickly from the down market than those who chose to liquidate their investments.

Discipline

Women are great money savers even though they have less to save due to a lifetime of enduring lower wages in their careers. Remarkably, women save a slightly higher percentage of earnings (about one percent more) than their male counterparts. But, adjusting for the higher earnings of men, women invest an overall net lower amount than men over time. Further, because women typically invest more conservatively, they wind up accumulating substantially less wealth for their nest egg. Coupled with a longer lifespan, the likely need for expensive long-term health care becomes more challenging to afford.[1]

Confidence

Only nine percent of women feel they are better investors than men.[2] A study based on twenty years of research finds that women saved a higher percentage of their earnings and earned slightly better returns than their male counterparts.[3] Women may initially feel lower confidence in their investing skills, but confidence grows over time as they gain experience over the continuum of their investing timeline.[4] Further, women are more collaborative and willing to engage and learn from more experienced investors and a Certified Financial Planner® Professional .

Women listen, understand and take advice they trust will help them succeed.

Investing is not unlike fishing: Luck has little to do with either endeavor; both are acquired skills honed by education and guidance from experienced practitioners. I’ve been aboard all-women deep sea fishing boats. On every trip I took with women who had never fished before, the all-women boats out-fished the men’s charter boats. The reason is we all took the advice and guidance of the captain and first mate and put it into practice to catch a boatload of fish. Men who have fished before thinking they already know how to catch fish don’t ask for advice or for instructions. Women are more interested in listening, collaborating and learning. I can guarantee that all those ladies with whom I fished cultivated the confidence to succeed on their next fishing trip. The same collaborative approach applies to confidence building in investing.

The women I know from my experience as a financial planner exhibit the essential characteristics necessary for success in building, preserving and protecting wealth. But a woman's (investing) work is never done.

Here are several steps women can take to become even more successful investors than they already are:

• Start saving early in your wage-earning years. From small beginnings at a younger age, potentially big rewards one day come.

• Be more assertive and vocal to help close the wage earnings gap by asking for raises when you objectively determine you are underpaid compared to peers who perform the same role. If you are in a leadership role, advocate for equal pay for women.

• Engage in conversations about money with your mothers, daughters, sisters, co-workers and friends. Men do it all the time. You will be surprised by what you might learn.

• Be more aggressive in your investment decisions, especially during your early wage-earning and investing years, by buying stocks that have a higher potential for greater returns than more conservative options; make sure you are well-diversified.

• Find an investment professional that you are comfortable with, and who can help you build a plan that is all about you, your needs and your goals.

• Remember how financial, physical and mental health all are intimately related and take time to focus on all three.

Good things happen when Resilience, Risk Awareness, Patience, Discipline and Confidence accompany women on their journey to financial independence.

Laura Webb is the founder and CEO of Webb Investment Services, Inc., based in Asheville, NC. She is a CFP® Professional and the creator of the Her Two Cents podcasts, which focuses on helping women normalize the conversation around money. Her team focuses its efforts on helping women secure their financial futures. For the rest of the story, please visit the Webb Investment Services, Inc. website or email her at laura.webb@raymondjames.com.

Webb Investment Services, Inc is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc. 82 Patton Ave, Suite 610, Asheville, NC 28801. 828-252-5132.

Any opinions are those of Laura Webb and not necessarily those of Raymond James.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results. 

Source/attributions:

[1] [2 [3] [4] Maurie Backman (2021), A Summary of 20 Years of Research and Statistics on Women in Investing