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Why Do Women Shy Away from Stocks?

By Charlene Rhinehart, CPA - Mar 5, 2021 at 5:05AM

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Investing in the stock market doesn't have to be seen as a risky guessing game reserved for men.

Despite the strides that have been made to make stock market investing accessible to all, women are still not participating at the same levels as men. The majority of research shows that women shy away from stocks, limiting their power to multiply their money or pass on wealth to future generations. 

Fortunately, there's a chance to turn these stock market obstacles into growth opportunities. By understanding the roadblocks and committing to a strategic plan of action, the stock market can become the ultimate companion for a woman seeking to build wealth over time. 

But first, let's address the barriers that are holding women back from investing in stocks. Then, we'll dive into rewards that can come by adding more stocks to your portfolio. 

Woman with hands over face

Image source: Getty Images.

The untold story about women and investing 

Women are not new to investing. In fact, women have been interacting with the stock market long before the Great Depression, according to research from George Robb, author of Ladies of the Ticker

But here's the problem: Women were not always welcomed, and literature like Thomas Mortimer's Every Man His Own Broker deemed women "too ignorant and unstable to manage their own investments." Thus, the confidence problem that reigns supreme today. Only 9% of women think they make better investors than men, according to Fidelity. And only 52% of women, compared to 68% of men, feel confident managing their investments, according to a report by Merrill Lynch and Age Wave. 

Despite the confidence barriers, women have proven to be competent investors. A 2017 report by Fidelity shows that women's portfolios outperformed men's on average by about 0.4 percentage points. In Ladies of the Ticker, Robb's research also finds that women did slightly better in the market than men -- even during the early 1700s. 

One possible reason why women may shy away from stocks today is that many are trying to overcome centuries of beliefs and images that showcase stock market investing as a "man's game." In the past, women's involvement in the markets was labeled as gambling, inappropriate, and aggressive. Now, the idea of making responsible money decisions through saving versus investing has become a popular thought. 

Safety isn't always the best form of security 

There's a ton of research available that shows that women give up the possibilities of stock market growth in exchange for safety. But the safest assets in the marketplace may not provide the best returns needed to help women easily achieve their financial goals.

U.S. Trust reveals that 65% of women are comfortable putting a high percentage of their assets in cash, and 41% of women aren't even thinking about investing it. This could put women at a huge disadvantage during retirement years -- especially since women typically live longer and earn less money than men. Opting in for safety now can lead to women working longer and harder later in order to catch up on the growth they missed out on earlier in life.   

Let's say you have $20,000. If you put $10,000 in a traditional savings account that earns 0.05%, you'll only have $10,005 after a year. However, if you put the other half of your money in a brokerage account to invest in stocks, you could easily see a typical yearly return of 7%, which would leave you with over $10,700 in your account after a year. The difference in potential earnings between saving and investing is compounded over time, leaving women who solely stick to saving behind the ball as they risk becoming victims of inflation.

The biggest risk is right in front of you 

Research shows that many women are willing to do whatever it takes to avoid risk. That's why only one in every five women (21%) is willing to put their money in the stock market, according to BlackRock. Another study commissioned by S&P Global shows that only 26% of women have money in the stock market.

Instead, women are parking their money in cash and cash equivalents like certificates of deposits, Treasury bills, and money market accounts. Per BlackRock, the average female investor keeps 68% of her portfolio in these "safe investments," compared to 59% of men. 

But investing in the stock market and losing money over the short term may not be the ultimate risk that women need to worry about. The greatest risk of all is denying yourself the opportunity to learn, grow, and become a better investor.

All it takes is education, research, goal setting, and strategic planning to reduce the risks associated with stock investing. Once more women start claiming their power in the stock market, the opportunities for financial success will be endless. 

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