During my more than 30 years in financial services, a lot has changed for the better when it comes to women and investing. But there’s still much more we need to do to ensure women are not only treated fairly, but that their differences are respected and valued. We need to actively break the biases that too often keep women from building wealth and living a life of financial independence, confidence and security.
Here are five of the most common biases women face when it comes to money and investing. If you’re a female investor, chances are you’ve come across a few of them personally. In fact, you may hold some yourself without being consciously aware of it. We all have biases of one sort or another; and most of us have felt the effects of these attitudes in our own lives.
See if any of these biases resonate with you:
1. Women are afraid to take investment risk: Let’s be honest. Women do tend to be more conservative investors. Why? A recent study explores possible reasons, ranging from a lack of financial literacy to lower confidence levels. But even when you take a financially savvy female investor who is reasonably confident in her ability to make investing decisions, you’ll still find that women in general tend to invest more conservatively and less actively than men. But guess what? Studies have also shown that women’s investing outcomes are often better than men’s for the very reason that women tend to trade less frequently and make fewer mistakes. Investing is a long game. Trading frequently doesn’t mean better results. In fact, it can mean missing out on long-term growth.
So is it fear — or level headedness? A common bias sees being risk averse as a negative. Yet smart investors understand that analysis of investment risk is an essential part of an individual investing plan. In fact, it has less to do with gender and more to do with thoughtful consideration of goals and timelines.
2. Women should save and invest just like men: Really? To me women actually need to save and invest differently than men for a lot of reasons. Longer life expectancy is one. Increased time out of the workforce to care for others is another. Plus, greater longevitiy means women are more likely to need long-term care services down the road. Add in historically lower earnings, and it means women in some ways need to be more aggressive than men when planning for their financial future, especially when it comes to saving.
Does that also mean trading more actively? Not necessarily. (See point #1) But it does mean starting to save as early as possible, taking a long-term view, understanding the role of stocks in creating wealth, and not underestimating the importance of establishing financial independence. Again, it isn’t really a matter of gender. It’s a matter of what’s right for your own financial security.
3. Women ask too many questions: This is a negative cultural bias that isn’t limited to investing. But it’s relevant because asking questions can be incorrectly perceived as a lack of confidence. In my experience, asking too few questions — or questions after the fact — is one of the areas where investors often go wrong. My advice? If you don’t know something, ask. If you need more information, ask. If you want a second opinion, ask. If your adviser isn’t willing to answer your questions, find another.
4. Women aren’t household financial decision makers: That might have been true in the past, but things are quickly changing. Today, about nine in 10 women who are married or live with a partner said they are involved in spending and investing decisions in their household, up from less than half a decade ago.
I find this encouraging because increasing financial literacy and financial opportunity for women is one of my passions. I believe it’s extremely important for women to be part of financial decision-making in every family — and to have resources and opportunities to achieve their own financial independence. So to the entire financial industry and anyone dealing with money matters, I say be careful not to underestimate the role women play today in making important financial decisions.
5. One-size-fits-all when it comes to financial advice for women: There’s an old marketing concept that’s been used to target products to women known as “pink it and shrink it.” The idea is if you just give something a traditionally feminine color and make it simpler, women will go for it. Wrong. And especially wrong when it comes to financial advice — because financial advice by its very nature has to be individual. There’s no “one-size-fits-all” for anybody.
No matter who you are, financial advice should be focused on your specific needs, values and goals. It should go beyond investing to include budgeting, insurance, estate planning, Social Security — the whole spectrum of your financial life. So where do you get this type of tailored financial advice? From a qualified financial adviser who’s willing to listen.
Many women prefer a female adviser because they expect to find fewer biases and a greater understanding of their needs. I personally believe more women should be encouraged to go into the financial advice field. But I would caution both men and women to put aside gender bias in choosing an adviser. Instead, look for someone with whom you can connect, who has the right combination of professional qualifications and personal qualities to support you.
Carrie Schwab-Pomerantz is president of the Charles Schwab Foundation. This article originally appeared as a blog posting on Schwab.com.
Also read: 100 women shaping the world of U.S. finance