Building Financial Confidence

When it comes to building wealth, women can teach men a thing or two.

Women do have some very real obstacles to overcome to achieve their financial goals. They typically earn lower salaries, and many women take time off from full-time work to raise children or care for aging parents. Women live longer as well, adding some pressure to save more than men for retirement.

But there is plenty of good news, too.

Women control about 51% of the wealth in the U.S. today, and the Federal Reserve estimates that number will increase to two-thirds by 2020. More women are starting and running businesses as well, with one in 10 becoming entrepreneurs, according to the newly released Global Entrepreneurship Report from Babson College. And in many ways, they are naturals at managing and investing their money.

How Women Can Build Their Financial Confidence

Plan. Women tend to look at their overall financial picture and focus on comprehensive financial planning. Men are more likely to focus on investment returns, according to Millionaire Outlook: Women & Wealth, a report from Fidelity Investments.

Save. We often hear that women have less money saved for retirement, and that is true. But that’s because they earn less than men. A 2013 study from Fidelity showed that while women typically earn two-thirds of what men do, and their retirement balances are smaller on average when adjusted for their compensation differences, women actually save more of their income.

Invest. Research shows that when women invest, they often outperform men. A landmark seven-year study from the University of California found that single female investors outperformed single men by 2.3 percent. Studies of female investment groups also show better performance. The reason: men tend to trade more than women, and are therefore more likely to lose money and drive up costs.

Diversify. Smart investing is about balancing risk and reward, and women are more skilled at that strategy. According to Fidelity research, women hold more balanced portfolios than men—which counters losses in volatile markets—and have a higher allocation of blended assets with 27% of their portfolio invested in blended assets versus 22% for men.

What Women Can Do Better

Although women avoid the kind of impulsive investment decisions and risk-taking that men are more likely to make, taking too little risk can harm women’s portfolios over time. That’s especially true as most women live longer than men do, and need a bigger retirement stash.

A big reason for risk aversion is a lack of confidence in their choices. While betting a big sum on a single biotech stock isn’t advisable, women do need to feel more confident about their investments. Men are significantly more likely than women to feel very confident about having enough money to live comfortably throughout their retirement years and take care of basic expenses, according to the Employee Benefit Research Institute.

When the market is volatile, a more conservative portfolio can protect an investor. But when investing for the long run, women may need to put more into stocks, for example, to generate the returns they need. Working with a financial advisor can help you view your financial situation objectively. And like anything else, the more you do, the more confident you feel about your abilities. The more women take control of their money, the more likely they are to realize their financial dreams.

Want to learn more about organizing your finances? Join Ivy Exec and Fidelity Investments on 8/14 at 6:30 PM EDT, where we share a method to get organized, build your plan, and own your future.