Investing used to be a male-dominated activity, but women are slowly but steadily closing the gap. Roughly 60% invest in the stock market now, according to research on women and investing, and younger generations report even higher percentages of female investors.
Men still have larger average balances, which isn't all that surprising given the gender pay gap. But data shows that women earn better returns than men over time. Here are a few possible reasons.
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1. Women tend to invest more conservatively
Studies on differences in investing behavior between genders found that women tend to invest moderately or conservatively, while men are more likely to take an aggressive approach. Roughly 53% of women chose a moderate approach, while just 39% took an aggressive approach, according to Wells Fargo. This is almost the exact opposite of what we see with male investors: About 39% of them chose a moderate approach and 55% chose an aggressive investment strategy.
Aggressive investing can lead to bigger gains, but it also opens the door to bigger losses. By investing more conservatively, women may be insulating themselves from some of the downsides while continuing to earn a decent profit.
2. Women are less likely to jump on investment trends
Data also indicates that women were less likely than men to invest in something just because it's trending. For example, a 2021 Robinhood survey found that 41% of female investors said they weren't interested in investing in cryptocurrency, compared to 24% of male investors.
In part, that could be because women report lower levels of confidence in their investing abilities; this might drive them to seek out more tried-and-true investments, like the stocks of well-known companies or index funds. These may not have the massive earning potential that many hope for from investments like cryptocurrency, but they can provide slow and steady growth over time.
3. Women are more likely to remain calm during market volatility
Fidelity found that women were 8% more likely to wait out market volatility than men. Men were significantly more likely to increase their investments during uncertain times, and somewhat more likely to decrease their investments as well.
Investing more could be an attempt to time the market by buying more shares when prices are low, in the hope of reaping larger rewards when stocks rebound. But this doesn't always work out the way investors hope -- you never know when prices will reach bottom and when they'll rebound.
Similarly, selling assets during periods of market volatility can lock in losses you might have otherwise recovered if you'd just left your investments alone. Women may experience fewer of these losses, since they're more likely to leave their portfolio unchanged during these times.
Try it for yourself
Whatever your gender, you can apply the above tips to increase your own investment returns. Review your investment strategy and consider changing it up if you feel you've taken on too much risk, especially if you're getting close to retirement. And consider checking your portfolio less often if you're tempted to make investment decisions based on a stock's recent performance.
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