It’s Time to Talk About the Gender Investing GapBy Katherine M. Dean, CFP® | September 27, 2021
As a longtime financial advisor, I can tell you that the gender investing gap is alive and well. Many women face all kinds of financial adversity—from lack of confidence to lagging wages for equal work. This all has a direct impact on their long-term wealth. Not surprisingly, one Merrill Lynch study found that only 52% of women say they’re confident managing their investments (compared to over two-thirds of men). What’s more, 41% of women wish they would have invested more of their money.
What many women may not know is that, on average, female investors actually outperform their male counterparts by about 40 basis points, according to data from Fidelity Investments. This suggests that when women are empowered, they tend to go far.
Financial Challenges That Are Specific to Women
Income plays a key role in financial well-being, but current labor trends reveal that women don’t have an even playing field. In 2020, women earned just 84% of what men earned, according to the Pew Research Center. That means women had to put in an extra 42 days of work this year to catch up to their male colleagues.
Numbers like these make it harder for women to invest as much as men; a detail that can lead to a smaller nest egg come retirement. Women, on average, also live about five years longer than men. When taken together, lower earnings plus a longer life expectancy could make it harder for women to enjoy a comfortable retirement.
The upside is that a little bit of knowledge can go a long way in setting things right. Thanks to the power of compound interest, the goal is to have your money working for you—not the other way around. Opal Wealth Advisors is helping women leverage this fact to their advantage as they become more confident investors.
Closing the Gender Investing Gap
Societal change isn’t going to happen overnight, but there’s always room for financial empowerment. The first step is connecting with a skilled advisor who can help you create a customized investing strategy. Instead of sitting on the sidelines, make the choice to play a more active role so that you better understand the process. You can then make more informed decisions, like dialing up your retirement contributions or exploring ESG investing. Whether you’re decades away from retirement or getting ready to exit the workforce in the near future, being an educated investor can only help you firm up your financial security.
Investing is also critical when it comes to keeping pace with inflation. It’s a topic that’s been getting a lot of attention in recent months. While it’s impossible to predict the future inflation rate going forward, it’s safe to assume that your nest egg will lose purchasing power over time. Smart investing can help protect against inflation, but it often requires taking on more risk in your portfolio. It’s a balancing act that’s best left in the hands of an experienced financial advisor, but it points to an important trend—women tend to be more risk averse than men. Research suggests that this is the case when it comes to things like picking stocks and investing in venture capital. It can bleed into the workplace as well, making women feel less comfortable to take risks and negotiate higher pay. That may be why many women feel safer building up their cash reserves instead of investing. An interesting Lexington Law survey found that if given an extra $1,000, men were 35% more likely to say that they’d invest it.
Financial education is essential to closing the gender investing gap. This is where the right financial advisor can make a big difference. At Opal Wealth Advisors, we understand the complex challenges that women are up against—and we’re devoted to helping them overcome them to become more informed and confident investors. Schedule some time with us today to take the first step toward financial empowerment.
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