Should Women Be Investing Differently Than Men?

There appears to be some debate among financial advisors about whether women need to invest any differently than men, simply because they’re women.

The notion that one’s gender might factor into their investment strategy is based on various realities women face, including that, on average, women live longer than men, make less money, and typically spend fewer years in the workforce (which results in lower Social Security income). Women also have higher healthcare costs due to their longevity.

Figures from 2017 show that women are paid about 82 cents for each dollar a man makes, based on median salaries for full-time workers, according to the Bureau of Labor Statistics.

That translates into a woman having to work about four more months per year to make the same annual salary as a man, points out Nadine Gordon Lee, CPA, and co-author of “Personal Financial Planning for Executives and Entrepreneurs: The Path to Financial Peace of Mind.”

Meanwhile, the average American woman is expected to live about five years longer than the average man (81.3 years vs. 76.3 years), according to the Kaiser Family Foundation.

“Greater longevity is one of many reasons women aged 75 and older are almost twice as likely to live in poverty versus men of the same age,” said Gordon Lee. “Of course, one of the biggest financial risks as we age is the cost of healthcare.”

For all of these reasons, it can be argued that a woman might need a slightly different investment approach than a man, in order to create a suitable safety net for their particular reality.

Don’t Leave Too Much in Savings

Stephanie Genkin, a Brooklyn-based certified financial planner, regularly hosts workshops focused on women and investing, and also works one-on-one with many single, professional women.

Investing, says Genkin, is a critical component to a woman’s financial future, but many smart women are afraid to get involved because they don’t fully understand risk.

“Very often when I do a first-time review with a woman, I see too much money sitting in cash in a savings account earning next to nothing. Women are often good savers, but it’s not helping them reach their long-term financial goals,” says Genkin.

In fact, she says, the only asset that’s guaranteed to lose money over the long term is cash.

“You think it’s safe but it’s losing to inflation year after year,” continues Genkin. “Your money for the future is rotting in the bank if you aren’t focused on investing.”

Read more: As Rates Rise, Are CDs and Savings Accounts Becoming Viable Investments Again?

Examine Your Stocks-to-Bond Ratio

Take a good long look at your retirement account, whether it’s a 401(k), an IRA, or some other investment vehicle. Is the lion’s share of money sitting in stable value funds? Money markets? Or other low-growth or no-growth assets?

It may be time to shift that asset allocation, says Genkin.

“Many women were spooked by the financial crisis 10 years ago and they got the wrong message about investing. Others are put off by investing jargon and don’t know what they are supposed to do,” said Genkin. “The risk isn’t losing all of your money, especially if you’re well diversified — it’s actually outliving your money.”

In terms of your stocks-to-bond ratio, the rule of thumb is the more time you have until you need the money, the more stock-heavy your investment portfolio should ideally be, said Genkin.

Stocks are the growth engine. They’re volatile in the short run, but provide more growth opportunity in the long run, she added. If you have 15 or more years left in your investing timeline, make sure your investment portfolio isn’t too conservative.

Allison Alexander, of Illinois-based Savant Capital Management, echoes Genkin’s sentiments on this front.

“Worried about preserving their assets, women often invest too timidly,” said Alexander. “No matter what your age, keep a portion of your investments in stocks. Every person’s situation is unique, and in order to keep up with inflation and grow your wealth, it is important to participate in the stock market.”

Read more: All About Bonds: How They Work and When to Buy Them

Maximize the Power of Compounding Returns

Because women typically live longer, it’s imperative to maximize returns for the future by starting an investment program today and allowing compounding to work its magic.

“To truly appreciate the power of compounding returns, buy shares of stable companies that pay dividends and enroll into a dividend reinvestment plan offered through a company or a dividend purchase plan offered through your brokerage or bank,” advises Victor Chiu, author of “Wall Street Kitchen: The Recipe Behind a Housewife’s 1,000% Stock Return.”

Several sectors can offer relative stability when pursuing this approach, suggests Chiu, including the financial industry (think: banks and life insurance companies); utilities (electric and telecom companies), and infrastructure, such as railways and airplane manufacturers. Chiu also suggests looking at technology companies and food and beverage producers.

Read more: A Simple Trick to Show Kids the Power of Compound Interest

Diversify with International Exposure

Over the long term, international and emerging markets offer better potential growth rates, making them a good option for women, suggests Katie Vercio, certified financial planner with Evergreen Gavekal.

“Investors as a whole can be very focused on short-term results, such as how the investment performs within a six- to 12-month time span. I think international markets have a lot of growth potential over the next five to 10 years,” said Vercio. “Thinking long-term for women is particularly important as we are expected to have a very long horizon based on our average life expectancy.”

Read more: Investing in nternational Stocks: Does Your Portfolio Need a Passport?

Investing for Social Impact

Not only should women adjust their retirement portfolios to reflect their longer lifespans — women often want their investments to reflect their values as well, says Ellen Remmer, creator of Invest for Better, a platform designed to help women use their money for social impact.

“What we know is that study after study has shown that women want to invest with their values, and they care about the purpose of the money in the context of meeting their financial security,” says Remmer.

However, because of time poverty, women simply do not spend as much time focused on investing as men do. A recent Fidelity study found that only 18% of women are the primary decision makers in relationships when it comes to long-term retirement and investment planning.

Remmer says social impact investing offers women an avenue to truly connect with their money in a way that has meaning for them, motivating them to become more actively involved.

“I don’t have research on this, but my experience was that when I started participating in responsible and impact investing, I found investing so much more engaging because it had so much more meaning,” continued Remmer. “It wasn’t just a bunch of numbers. I was helping to create better paying jobs or create a new technology, or improve the circular economy in terms of food waste.”

Women, says Remmer, have the power to unleash meaningful social change through their investment choices and need to bring their values to the fore of financial decision-making, much as their leadership drives commerce, politics, activism, and culture.

Read more: Can Socially Responsible Investing Add Meaning to Your Money?

The Case for Ignoring Gender

There are plenty of financial advisors who point out that investment decisions should not vary based on gender. Rather, decisions should be based on one’s unique life circumstances and finances. It’s a valid point, one worth noting.

“Women on average live a few years longer than men, but all things being equal—hardly a reason to create different financial strategies,” said Len Hayduchok, a certified financial planner with New Jersey-based Dedicated Financial Services.

The bigger issue, said Hayduchok, is the different views tied to risk taking. Men tend to be more willing to take risks associated with investment.

Vercio, of Evergreen Gavekal, offers a similar analysis. “I don’t think that men and women need to invest differently to achieve their goals, but I think that many women have biases to overcome that can hinder their financial success,” she explained. “One of the biggest things that I see is that women are not comfortable investing, so they often avoid it all together.”

Women, continued Vercio, can be extremely fearful of making the wrong investment, and tend to be more focused on short-term results.

“Many women suffer from a lack of confidence, and in my experience, the only way to become more comfortable is to take action,” she said. “My advice is to do some research, start small, and think long-term.”

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