Financing Strategies that Women Use and Men Don’t

U.S. Money Reserve
7 min readJun 1, 2020

by Francine Breckenridge, Chief Compliance and Legal Officer at U.S. Money Reserve

Women and men differ in their approaches to financial matters. Here are five strategies women use that men tend to shy away from.

In previous columns, I’ve discussed the fact that women and men often approach finances in different ways. While some of these things come down to the way we see the world, some of them are misconceived stereotypes. However, a few biological, emotional, and environmental factors influence how men and women see overall financing strategies, not just the dollars and cents that run our days.

The value in examining these differences is that it allows us each to assess where our blind spots might be and where we might be able to leverage the knowledge of the opposite sex to comprehensively improve our financial lives. The smarter we can be with our money, the better our lives will be in the long term.

While there are a number of financial strategies out there, finding the right one that works for your risk tolerance, income level, and stage in life is crucial. By examining the various strategies that people use, we can improve our chances of living a financially healthy and rewarding life. Here are five financing strategies that women tend to use, but men don’t.

Women Tend to See Both the Forest and the Trees

Attention to detail and the ability to see the 30,000-foot view are two things that women tend to excel at, which means that as investors, they tend to be able to see both the forest and the trees. It turns out that there are biological reasons for this, too.

As most of us already know, the brain is made up of two hemispheres, the left and right. The left brain is often associated with analytical, sequential, and detail-oriented thinking. The right side of the brain tends to deal with more creative pursuits and is more nonlinear, intuitive, and holistic.

A study done in the 1980s showed that there are fundamental biological differences between how men and women rely on their left and right brains. While some studies followed that contradicted this, a recent study, completed and published in 2019, showed that biological differences between the brains of the sexes do exist.

The 1980s-era study showed that while men tend to be left-brain dominant, women often switch regularly between the left and right brain, which allows them to leverage both the analytical side of their mind and the creative and nonlinear side. That means that when women look at something, they can see both the details (and store those for future use in analytical behavior) as well as the complete picture.

When it comes to investment strategies, it’s really crucial to be able to take in both the broader context of what’s happening in the world and the economy and the subtleties of what might be happening in a particular sector or company. That means that when women do invest (though they tend to stay out of the stock market more than men), they tend to make better investment choices that benefit them in the long run.

Back in 2018, the Warwick School of Business published a study that bore out this idea. Their study of 2,800 investors showed that women tend to outperform both the FTSE 100 and their male counterparts by as much as 1.8 percent. That’s considerable when margins on investing can be extremely narrow. The researchers suggested that their results are primarily based on women’s ability to assess both the fundamentals and the broader trends at play in a market and the world.

Women Tend to Take the Slow and Steady Path Rather Than Opting for Risky Quick-Cash Bets

In addition to their ability to see the forest and the trees when they invest, women tend to be the buy-and-hold type, whereas men tend to chase the quick buck. The same study by the Warwick Business School showed that female investors are less likely to invest in what researchers termed the “lottery style” versus their male peers. The study found that women trade, on average, just nine times per year, while men trade 13 times per year.

While that difference isn’t tremendous, the researchers believe it stems from the fact that women tend to choose to invest in companies that have a longer track record of success, whereas men tend to invest in lower-value stocks that “could” rapidly increase in value.

As it turns out, the reasons for investing also differ amongst the sexes. Women tend to invest to reach a goal, while men tend to invest because they enjoy the thrill of investing, the researchers found. That doesn’t mean that women are more cautious, however. It means that women tend to take a more considered approach.

Women also tend to stick with investments for a longer period of time. A 2017 study of female investors by Wells Fargo showed that women tend to be more disciplined and patient when it comes to investing.

Women Ask for Guidance When Investing

The old adage that women are the first to ask for directions, while men are likely to be in the car struggling with the map tends to ring true when it comes to investing differences between the sexes as well.

Back in 2017, Wells Fargo did an investment study that focused on women and found that nearly twice as many women as men want financial advice from seasoned advisors. They attributed this to the idea that women generally don’t feel nearly as confident as men do when it comes to investing, and women want a trusted advisor to help them make sage decisions.

At the same time, women say that they are less likely to seek out the advice they want. It turns out the reason for this is that they feel like they don’t have enough money to make it work, according to a 2017 study by Fidelity.

Women also tend to feel like they don’t have the right mentors for their needs when it comes to investing. There are simply fewer high-profile, well-known women in the world of investing for women to emulate.

Women Are Less Susceptible to Overconfidence

The stereotype of the overly self-assured man is rampant in investing, but there may be some actual truth to it. Women, it turns out, are less susceptible to the “illusion of control,” or the tendency for people to believe they have more control over an outcome than they actually do.

The illusion of control works hand in hand with overconfidence insofar as it makes traders feel like they can’t lose during upswings. As Forbes points out, this kind of mentality often leads to overtrading, which hurts investment returns in the long run because it results in higher costs per transaction.

Additionally, as the same story shows, there are gender differences in how men and women respond to market swings. While reactions are often highly individual and based on various risk tolerances and the amount of money someone has to invest, overconfident investors tend to get caught up in the momentum of the market to try and make more money in an up market or sell more stocks in a down one. Men, it turns out, are more susceptible to the desire to “do something” in either type of market, which makes them more impulsive investors.

Women Tend to Save Rather Than Invest

This strategy tends to be a double-edged sword. While it’s always good to have savings, women tend to opt out of investing more frequently than men for a variety of reasons, including their propensity to save. In truth, if women invested more, they could earn more money than men. As I mention above, multiple studies have shown that women’s investment strategies yield better returns than men’s.

Since women worldwide earn less than men, they generally are forced to save more of their earnings rather than invest them to even approach parity with their male counterparts. That means that they generally have less to invest.

As I have written before, instead of investing in the stock market, women tend to hold as much as 71% of their assets in cash, while men hold 60%. According to Money magazine, part of that has to do with the fact that men and women manage their money differently. Women could learn from their male counterparts and step up and invest more to improve their returns.

The Bottom Line on the Difference Between the Sexes and Financial Strategies

No bones about it — there are some significant differences in how women and men leverage financial strategies to improve their lives. While the conversation about the differences between the sexes can be fraught with oversimplified stereotypes, women and men alike can take advantage of the differences between them to better manage their investment and financial strategies and improve their returns. By taking these five different techniques and approaches to heart, you can improve your long-term financial stability, ensure that you have enough saved for a rainy day, and watch your investments grow over time.

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