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Women and investing: The strengths of women investors

Women comprise more than half of the U.S. population,1 but no two women are the same when it comes to managing their money. When we surveyed investors, women were optimistic about their ability to achieve short- and long-term investment goals and have become increasingly assured that the stock market is a good place to invest. We also found that women investors are more likely to work with an investment professional and more inclined to stick to their investment plan.2

At some point in their lives, most women likely will be in charge of their family’s finances.3 Women have increasingly become the sole or primary breadwinners for their families and often take a leading role in educating the next generation in financial matters.

Studies reveal that women have smaller nest eggs when compared with men of similar age and income, in part because many may invest more conservatively. Additionally, because women, on average, earn less per dollar than men and often report taking time off from work to care for others, they can fall behind financially. With careful planning and appropriate investment allocations, we believe women can be prepared to reach their financial goals.

What women say about their finances

In a 2021 survey, women indicated that they are less confident in fully funding their retirement, with just 20% of women highly confident they will have enough money to maintain their lifestyle in retirement compared with 25% of men. Among other findings:

72% of women believe that the stock market is a good place to grow their retirement savings, while over 76% of men believe so. 49% of women have a written plan for finances and retirement compared with 44% of men.

Important strengths

In our study of Wells Fargo Advisors clients, we found that women exhibited several important strengths related to their investment success, including discipline, willingness to learn, and a selective approach to risk-taking.

Women’s greater willingness to develop a financial plan, adhere to that plan, and work with an advisor are among the factors we believe led to attractive investment results. In a study covering the period January 2016 to December 2020, female-led accounts achieved higher absolute returns than male-led accounts for the five-year period. On a risk-adjusted basis, women investors led men, with single-female accounts leading followed by female-led accounts.4

This means that women achieved higher returns on their investments while taking on less risk than men, when risk is measured by standard deviation.5 The Wells Fargo Wealth and Investment Management Analytics data showed that women investors, on average, took approximately 82% of the risk that men took.4

Following a sound investment strategy and taking appropriate levels of risk are important to long-term results.

Risk-adjusted returns for women and men

Single-female and female-led accounts achieved higher risk-adjusted investment returns than men.

Bar chart lists risk-adjusted returns  for accounts:   female led (1.29), male led (1.22), single female (1.37), and single male (1.15).* Source: Gender Differences in Performance at Wells Fargo Advisors, Wealth & Investment Management (WIM) Analytics, July 2021. The total study included more than 50,000 accounts from December 2010 to 2020 with investable assets of $50,000 or more. Excludes advisory accounts. Five-year time-weighted (or geometric mean) returns net of commissions and fees between January 2016 and December 2020. Past performance is no guarantee of future results. Performance results represent only the results of the survey.

What you can do now

Learn more about investing: Talking with an investment professional or a financial planner can help you understand the basics of investing — things like setting aside enough cash for an emergency, defining your time horizon and risk tolerance, and developing an appropriate asset allocation.

You can also learn about investing by reading financial journals, watching financial news channels to learn the industry terminology, or listening to investment-related podcasts or market updates on the radio.

Setting investment goals: Investment goals can be as varied as the people who define them, but they generally fall into the categories of income, growth, or a mix of the two. Moreover, each of your investment goals will generally have an associated time period that helps determine what type of assets you should potentially use to assist you in reaching your investment goals with the appropriate level of risk.

Read the full report (PDF)

1 U.S. Census, 2020: Women were 51% of the U.S. population.

2 Wells Fargo/Gallup Investor and Retirement Optimism Index, February 2021. Results for this Wells Fargo/Gallup Investor and Retirement Optimism Index are based on a Gallup PanelTM web study completed by 1,536 U.S. investors, aged 18 and older, from February 8 to 16, 2021. This quarter’s poll includes an oversample of Black and African American investors, resulting in a total of 573 Black and African American investors included in this survey. For this study, the American investor is defined as an adult in a household with stocks, bonds, or mutual funds of $10,000 or more, either in an investment account or in a self-directed IRA or 401(k) retirement account.

3 “Women’s Quick Facts: Compelling Data on Why Women Matter.” STEMconnector®, November 2016.

4 Gender Differences in Performance at Wells Fargo Advisors, Wells Fargo Wealth & Investment Management (WIM) Analytics, July 2021. Average annual trades over a five-year period from January 1, 2016 – December 31, 2020.

5 When a stock or portfolio has a higher standard deviation, the predicted range of performance is wide, implying greater volatility.

Risk considerations

Asset allocation is an investment method used to help manage risk. It does not ensure a profit or protect against a loss. All investing involves risks, including the possible loss of principal. There can be no assurance that any investment strategy will be successful. Investments fluctuate with changes in market and economic conditions and in different environments due to numerous factors, some of which may be unpredictable.

Each asset class has its own risk and return characteristics. Alternative investments trade in diverse complex strategies that are affected in different ways and at different times by changing market conditions. Strategies may, at times, be out of market favor for considerable periods with adverse consequences for the investor. Bonds are subject to market, interest-rate, credit/default, liquidity, inflation, and other risks. Prices tend to be inversely affected by changes in interest rates. Credit risk is the risk that an issuer will default on payments of interest and/or principal. This risk is heightened in lower-rated bonds. Cash alternatives typically offer lower rates of return than longer-term equity or fixed-income securities and may not keep pace with inflation over extended periods of time. Real assets are subject to the risks associated with real estate, commodities, and other investments and may not be suitable for all investors. Stocks are subject to market risk, which means their value may fluctuate in response to general economic and market conditions, the prospects of individual companies, and industry sectors. Real estate has special risks, including the possible illiquidity of underlying properties, credit risk, interest-rate fluctuations, and the impact of varied economic conditions. The commodities markets are considered speculative, carry substantial risks, and have experienced periods of extreme volatility.

Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly-owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

Wells Fargo Investment Institute thanks Justin Kreiger, CFA, and John Morton, M.S., Ph.D., of Wells Fargo Wealth & Investment Management Analytics Group for the use of their research on “Gender Differences in Performance at Wells Fargo Advisors”. Wells Fargo Wealth & Investment Management, a division within the Wells Fargo & Company enterprise, provides financial products and services through bank and brokerage affiliates of Wells Fargo & Company. Brokerage products and services offered through Wells Fargo Clearing Services, LLC, a registered broker-dealer and nonbank affiliate of Wells Fargo & Company. Bank products are offered through Wells Fargo Bank, N.A.

The information in this report was prepared by the Global Investment Strategy (GIS) division of WFII. Opinions represent GIS’ opinion as of the date of this report, are for general informational purposes only, and are not intended to predict or guarantee the future performance of any individual security, market sector, or the markets generally. GIS does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to any particular investor or potential investor.

This report is not intended to be a client-specific suitability analysis or recommendation; an offer to participate in any investment; or a recommendation to buy, hold, or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs, and investment time horizon.

The Wells Fargo/Gallup Investor and Retirement Optimism Index was conducted August 5 – 14, 2016, by telephone. The index includes 1,021 investors randomly selected from across the country with a margin of sampling error of +/- four percentage points. For this study, the American investor is defined as an adult in a household with total savings and investments of $10,000 or more. About two in five American households have at least $10,000 in savings and investments. The sample size is composed of 71% nonretirees and 29% retirees. Of total respondents, 43% reported annual income of less than $90,000; 57% reported $90,000 or more.

Wells Fargo Wealth & Investment Management, a division within the Wells Fargo & Company enterprise, provides financial products and services through bank and brokerage affiliates of Wells Fargo & Company. Brokerage products and services are offered through Wells Fargo Clearing Services, LLC, a registered broker/dealer and nonbank affiliate of Wells Fargo & Company.

This information and any information provided by employees and representatives of Wells Fargo Bank, N.A. and its affiliates is intended to constitute investment education under U.S. Department of Labor guidance and does not constitute “investment advice” under the Employee Retirement Income Security Act of 1974. Neither Wells Fargo nor any of its affiliates, including employees, and representatives, may provide “investment advice” to any participant or beneficiary regarding the investment of assets in your employer-sponsored retirement plan. Please contact an investment, financial, tax, or legal advisor regarding your specific situation. The information shown is not intended to provide any suggestion that you engage in or refrain from taking a particular course of action.

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, a registered broker-dealer and nonbank affiliate of Wells Fargo & Company.