5 important things women know about money (and men don’t)

When it comes to their wallets, women face several obstacles. For one, there’s the gender pay gap where women only make 78 cents for every dollar that a man does. Secondly, there’s the fact that women live, on average, 2.3 years longer than men — necessitating a bigger nest egg for retirement.

But the news isn’t all bad. When it comes to investing women are, hands down, more successful than men. Research back in 2001 discovered that overall, female investors outperform their male counterparts by 1 percentage point. More recently, a study found that women’s investments earned 12 percent more than those owned by the opposite sex in 2014.

So let’s take note and learn how to be savvier investors from those in the know: women.

Lesson #1: Save more.

Contrary to popular thinking, females have more dough stashed in savings than males. That’s right. Women save 8.3 percent of their money, compared to men who only put aside 7.9 percent. For workers who earn $100,000 annually, that’s only a difference of $400 each year. While that doesn’t sound like that much, if each worker continues to follow the same savings plan over a lifetime, the woman will have almost $45,000 more socked away for retirement (assuming a 7 percent return) after 30 years.

Lesson #2: Work together.

A recent Prudential study found that women take an active role in their financial decisions, but they don’t go at it alone: 31 percent of them work with a financial advisor, just about a third consult financial company websites and financial news websites as a way to learn about investments, and almost one in five use financial planning websites and apps. Instead of turning things over to someone else, women thoroughly educate themselves on portfolio decisions and only make a move if it feels right (that’s exactly how we work with our clients here at TradeKing Advisors – our company).

Lesson#3: Be more social.

Females are active participants in investment clubs, too, accounting for about half of the participants nationwide.

In the era of social media, it’s easier than ever to “find your tribe” online. But many investors still prefer in-person clubs for numerous reasons. They can be a great way to learn about various types of investments, to encourage good saving and investing habits, and to discuss any financial questions you may have.

Money clubs can also provide a forum to talk openly about money — a topic that’s usually off-limits in social gatherings. Getting any financial worries you may have out in the open can be a great way to alleviate them, since it’s likely that other members will have the same concerns as you.

Finally, a monthly meet-up makes your investing plan feel tangible, realer – and hopefully more attainable.

(Note: here’s a list of 42 Charlotte investment meetups from Meetup.com).

Lesson #4: Practice self-control.

Saving your money is certainly a test of endurance. After all, you’re giving up the opportunity to have something now in order to afford something else in the future. Numerous psychology studies have found that women are better at delaying gratification than men, while another by asset manager Russell Investments discovered that women have a significantly larger long-term financial planning focus than men. Because they think about the distant future, women can more accurately plan — and save — for it.

Lesson #5: Be less bold.

When it comes to money matters, it’s important to be confident. After all, a lack of it could cause you to avoid investing completely, missing out on the possible growth and earnings that come along with doing so. Generally speaking, male investors are more assured about their finances. (Case in point: In 2013, Wells Fargo discovered that 41 percent of affluent women – those with more than $450,000 in investable assets and an annual household income of $145,000 – aren’t confident in their investing ability.) Getting too big in the head, however, can cause you to take unnecessary gambles with your investments.

Because men are more confident, they tend to trade their portfolios more actively than women, plus they’re more likely to make impulsive or risky moves with their money. (Think: Purchasing a stock simply because a talking head raves about it on television.) Because women make fewer trades — on average, adjusting their asset allocation 20 percent less than men — and holding their investments for longer periods of time, their overall investment performance is better. This behavior means that women pay fewer trading fees as well, further upping their overall performance.

At TradeKing (our company), we’ve seen many active-trader clients enjoy success managing their own portfolios. But we’ve also seen some investors fall behind. Active trading takes diligence, commitment and a sustained interest in the markets. Many long-term investors simply don’t have that kind of time or interest – but still need to reach their financial goals.

Those account balances speak for themselves, so clearly women are on to something. Now it’s up to each one of us to implement these strategies in our own lives.