Investment tips for women

It seems to be a hot thing to market specific financial advice for women. I suppose women are a growing sector of potential customers in the financial advice industry (an optimistic way of saying that we only recently started to have any money of our own at all). As a woman and investor, anything geared toward "women investors" makes me weirdly uncomfortable. I always feel like they're trying to play up the fact that I'm a woman to activate stereotypes about women in my brain--that we're supposedly worse at math, overly emotional, etc. I don't know if they are doing this on purpose, but it makes me concerned that other women who never thought they needed any special financial advice may be getting primed to accept help from less than scrupulous sources.

So my top investment tip for women is this:

Be skeptical of "investment tips for women"

The same investment advice applies to women as to men. Investment advice isn't gendered. Money in the market doesn't know if it belongs to a woman or to a man. Stocks and bonds can't give different returns to men and to women. If anyone did give different advice to women than to men, I wouldn't trust them!

I read Suze Orman's Women & Money, and while the advice wasn't bad, it was no different from the financial advice she'd give to anyone. Maybe it had a slight bit more emphasis on making sure you are protected in a marriage and urging readers not to allow their partner to take complete control of the finances. That's advice that may apply statistically to more women, but it could also apply to men, and anyway I'd estimate that the book was really only about 5% different from the standard Suze Orman money guide.

Why does Suze Orman keep writing the same book over and over for slightly different audiences? Maybe she thinks that wrapping up her basic message in slightly different packages is a good way to get solid advice to as many people as possible. Maybe it's because she wants to make more money.

Marketing to a specific sector is profitable. Women's yogurt isn't different from plain old yogurt, but the manufacturers have figured out that they can make more money by creating separate products that appeal to particular demographics.

At best, "investment tips for women" or "financial advice for women" may be basic good advice with unnecessary window dressing. Often, it's a money grab. Either way, it's usually about as necessary as a Bic For Her pen.

Do men and women behave differently as investors?

While I think it's impossible to give someone good individual financial advice knowing only their gender (better than the basic advice you'd give to anyone knowing nothing about them), I do think it's possible to tease out average differences between men's and women's behavior from large datasets.

Women might be more risk-averse, but the jury is out

Numerous surveys report that women are less tolerant of investment risk than men, but this is complicated by so many factors that it's hard to tell if it's even true. It's certainly a meme that plays into our stereotypes about gender, which makes it particularly important to regard it with skepticism. A 2013 ThinkAdvisor article Busting the Risk Myth of Women and Investing describes various researchers' challenges to this claim, including one I found particularly interesting and insidious: women may be steered toward less risky investments because their advisors or financial managers assume they are more risk averse!

Women save more of their income… but they have less income

A 2014 Vanguard study showed some of those differences from their 2013 data. Essentially, women were more likely to enroll in workplace savings plans and to save a greater percentage of their income. However, they didn't save more in pure dollar amounts--men still had larger portfolios, because they're paid more. So far, no interesting information: women aren't necessarily "better at saving," they have to save a higher percentage of their income because they have fewer dollars!

Women are more likely to take advantage of professional help

The other difference Vanguard noted was the women were more likely to have professionally managed portfolios, and less likely to "DIY" their investing than men. No explanation for this was offered. I have found this to be anecdotally true--most of the people I know who DIY their investing are men. I'm a DIY-er myself, and I can understand why it's not for everyone: it takes a certain amount of chutzpah and confidence to say, "I know better than the professionals. This can't be that hard, right? I can figure it out!" It's possible that women are less likely to have this (over)confidence. (It's important to note that Vanguard found that those with professionally managed portfolios had better outcomes. To which I say, "Yeah, but a lot of the DIYers make foolish choices. I'm going to be smart. Oh look, the sun. Let me fly too close to it.")

Girls are raised with less financial education than boys

In their 2014 Parents, Kids & Money survey, T. Rowe Price found that boys reported their parents talking to them about money more than girls. And that's a survey of kids who were between eight and fourteen last year. I imagine the gender differences were even more pronounced in the past, i.e., when the rest of us were growing up.

This last point isn't strictly investment related, but I mention it as a possible explanation for why women may be less comfortable DIYing, and, potentially, especially susceptible to marketing claims of great investment advice for women.

Investment advice for humans

I've met a lot women and men my age (20s and 30s) who invest in some way (participate in a 401(k) at work, etc.) but don't feel confident as investors. If you're in that boat, there's no time like now to learn and gain that confidence. Don't assume that it's too boring or complicated to understand. Maybe you don't know much about it yet, but that's how everyone starts out. Nobody really gets a good financial education, at least not in the U.S. Parents may talk about money more to boys than to girls, but many parents don't talk to their kids about money at all, and I don't know about you, but I sure didn't get a course in school about it. I started out knowing nothing, but I put some time into it, and I now consider myself to be a financially literate person. And I'm just a simple idiot. I don't know calculus or how to ride a bike or tell left from right or read an analog clock. (I had a digital watch growing up ok??) For a basic primer, I recommend Personal Finance for Dummies. Personally, I think it's totally easy and fun to DIY a portfolio, but your mileage may vary. If you're interested in learning about it, I recommend The Bogleheads' Guide to Investing.

You don't need to become a CPA or learn to "beat the market" (if you think you can do that, you are probably wrong!) You just need to understand the basics, and you need to be able to tell when you are being taken for a ride. Even if you ultimately decide to use professional investing services, you need to know that much.

Finally, be wary of anyone who tries to use stereotypes about your gender, or any other group you fall into, to peddle a product, service, or scheme. Even if they're not intentionally trying to con you, they may allow their own unconscious prejudices to guide you to less-than-optimal courses of action. Be your own advocate. As J.D. Roth of Get Rich Slowly says, nobody cares more about your money than you do.


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