Invest Like a Woman: Closing the Gender Wealth Gap

International Women’s Day (March 8th) celebrates women’s achievements and the importance of empowering women in all aspects of life. Today, I want to highlight the world of investing specifically. Why? Women have traditionally been less likely to invest than men, and over time, this has had serious financial repercussions.

The good news is that, in recent years, more women have been saving for retirement and investing their money. Fidelity's 2024 Women & Investing Study finds that 7 in 10 women own investments in the stock market—an 18% increase compared to 2023. More women, especially younger generations, are investing, which is fantastic! My goal today is to provide insights and actionable tips for women to take control of their financial future through smart investing so we can close that gap even more.

Why Financial Empowerment is Crucial for Women

There are a few challenges women face that make financial empowerment so important. For one, women working full-time earn 84% of what men earn. This gender pay gap has a negative compounding effect on a woman’s financial health over her lifetime, leading to lower lifetime earnings and less retirement savings.

Since women generally live longer than men, investing and long-term financial planning become even more critical. Many of our widowed clients find themselves in unfamiliar territory when faced with managing household finances after losing a spouse. In addition to coping with grief, they may feel overwhelmed by the responsibility of handling finances for the first time. For retirees, the loss of a spouse also means losing a second Social Security check, which can make it more challenging to make ends meet.

Investing is one of the most significant ways to bridge the wealth gap and promote financial independence. It’s never too early for a woman to be educated and engaged in her investing journey.

Overcoming Common Barriers Women Face in Investing

Even with the considerable progress women have made in taking control of their finances, several common barriers remain. Many women feel less confident in their financial knowledge, especially if their spouse or significant other primarily handles financial decisions. This often leads to the belief that they are not in a position to make smart financial choices. Others simply don’t know where to start or feel overwhelmed about where to seek guidance.

Interestingly, women investors tend to have better investing returns than men, with studies showing differences of 0.4% to nearly 1%. This is largely because women investors tend to be less impulsive and more likely to adhere to a buy-and-hold strategy rather than actively managing their investments. As a result, women tend to remain calm during market volatility—perhaps without realizing it—and avoid making major investment changes at inopportune times.

Key Investment Strategies for Women

Every woman should be equipped with key strategies to jumpstart or enhance her investment journey.

A financial plan for any woman starts with understanding her goals. I recommend breaking goals into three categories: short-term, mid-term, and long-term.

• Short-term goals may include starting an emergency fund or understanding monthly expenses.

• Mid-term goals could involve saving for a significant expense (such as a car or trip) or paying down debt.

• Long-term goals often include homeownership or planning for retirement.

Diversification plays an important role in investing by reducing risk and increasing portfolio returns. There’s a common saying: Don’t keep all your eggs in one basket—and that’s especially true for investing. Diversification doesn’t mean having multiple accounts at different banks or custodians. Instead, a balanced portfolio includes a mix of stocks, bonds, mutual funds, and exchange-traded funds (ETFs). This approach positions your portfolio to better withstand market volatility and stay on course to achieve long-term goals. If a portfolio is heavily concentrated in one asset class or a single company’s stock and that asset underperforms, it can significantly impact the entire portfolio’s value.

Unless you are entirely invested in cash or money market equivalents such as CDs or Treasuries, it’s normal to experience ups and downs in the market. Many new investors feel nervous when they see their portfolio decline for the first time. This often leads to selling at a low, locking in major losses—the exact opposite of what should be done during a market pullback.

To avoid emotional decision-making during market volatility, consider:

• Understanding your investment tolerance and time horizon.

• Regularly rebalancing your portfolio to maintain your overall allocation strategy.

• Remember that investing is a long-term game—compounding returns take time, and consistent growth can take years to materialize.

Retirement Planning for Women

Many clients tell me that retirement is one of their biggest concerns. The average retirement for women lasts 21.3 years—that’s a long time! Because retirement can feel distant, it’s eye-opening to realize that financial security in retirement doesn’t just happen. Social Security replaces only about 40% of a worker’s pre-retirement income, meaning additional savings are essential to living comfortably in retirement.

Be sure to take full advantage of any employer-sponsored retirement plan, such as a 401(k) or 403(b), if available. Many of these plans offer employer-matching contributions, which are often underutilized—leaving free money on the table. If you don’t have access to an employer-sponsored plan but have earned income, you can contribute to an IRA (Individual Retirement Account) to build retirement savings.

Since none of us know how long we will live, some women may have longer retirements than the average person. This underscores the importance of having enough savings to cover living expenses—especially in case of unexpected long-term care needs or medical costs. Understanding your current expenses compared to what they will be in retirement can help determine how much savings you’ll need to maintain your lifestyle.

Conclusion

With the right strategies, knowledge, and resources, women can take control of their financial future and build a strong foundation for themselves and their families. Financial independence is a journey that requires consistent effort, but you don’t have to do it alone!

We are here to help and provide personalized investment strategies to ensure you are on the right track. Reach out to our team to learn more about our services.