Want a Better Retirement? Listen to the Opposite Sex

Men and women often go about investing in different ways. But one method isn’t necessarily better than the other.

As The Wall Street Journal reports, both genders’ retirement savings might benefit if men and women learned from one another’s strengths.

In some ways, men and women have similar investing tendencies. For example, they have about the same level of exposure to stocks — 73 percent for women and 74 percent for men.

But they differ in other key ways. According to WSJ:

• Women are more likely to participate in employer-sponsored retirement plans (73 percent compared to 66 percent).
• Women are more likely to save a greater percentage of their income (7 percent compared to 6.8 percent).
• Women are more likely to invest in target-date funds (which we explain in “Why You’re Stressed About Your 401(k)“), while men are more likely to invest in other options, like stock funds.
• Men earned a greater average annual total return on stock investments in the five-year period that ended in December (10.1 percent compared to 9.7 percent).

Perhaps the biggest difference has to do with investing confidence, however. The WSJ reports that experts say this is the main investing difference between men and women.

A recent Merrill Lynch research report titled “Women and Investing: A Behavioral Finance Perspective” found that women were much more likely to say they “know less than the average investor about financial markets and investing in general.” Fifty-five percent of women agreed with the statement, compared to 27 percent of men.

Kristen Robinson, a senior vice president at Fidelity Investments, says women’s lack of confidence is especially evident in what they do with money they have to invest outside of employer-sponsored retirement accounts.

“They put it into a savings account,” she tells the WSJ.

Fidelity’s 2013 study of couples in committed relationships found that women tend to have a lower risk tolerance, with 4 percent willing to invest a substantial amount to achieve potentially higher returns, compared to 15 percent of men.

Women are also less likely to trade, however. Vanguard senior research analyst Jean Young says that is a good thing because it means they’re less likely to trade at the wrong time.

As Money Talks News founder Stacy Johnson puts it:

Try to time the market and you’ll likely find yourself on the sidelines when the market takes off — and over-invested when it crashes. The best way to approach stocks is also the simplest — dollar cost averaging, also known as systematic investing.

To learn more, check out “Ask Stacy: How Do I Invest in the Stock Market.”

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