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Women & Investing: A Stronger Grip on Their Financial Futures

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The power of the purse is increasing at an unprecedented pace. A third of the world’s financial assets is now under the control of women. From 2016 to 2019, they accumulated wealth at a compound annual growth rate of 6.1%. Over the next four years, that rate will accelerate to 7.2%—adding $5 trillion more annually to the global wealth pool, according to a comprehensive global study.1

These strides are equally apparent in the United States, with women no longer relegated to the passenger seat when it comes to investment decisions and in control of $10.9 trillion.2 That amount is expected to reach $22 trillion within 10 years and then increase even more as Baby Boomers eventually pass down at least $30 trillion, and heterosexual women—who are 60% more likely to outlive their husbands—inherit a disproportionate percentage of this wealth by 2030. This is a potential wealth transfer of such magnitude that it approaches the annual U.S. gross domestic product.

While they are increasingly becoming powerhouses in the financial arena and being more actively engaged in financial decisions than ever before, studies show women still face unique challenges that highlight the importance of making planning a priority.3 In this paper, we explore how a growing number of women are taking ownership of their financial lives, the characteristics that make women adept investors, and where further opportunity exists for them to fulfill their potential as captains of their financial destinies.

Think pink: Women enjoy innate investing advantages

When women choose to take charge of managing their money, the results tend to be quite good. Research performed by Warwick Business School, Europe’s top-ranked business school, found that women outperformed men at investing by an average 1.8 percentage points per year over a 36-month period.4 Over time, this can amount to a big difference in total wealth. This study examined the trading habits of 2,800 investors over three years. It concluded that the reason for the outperformance by women was a result of men more frequently picking speculative stocks, holding onto losing positions longer, and taking profits sooner.

Please see important disclosures at the end of the article.

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1 Anna Zakrzewski, Kedra Newsom, Michael Kahlich, Maximilian Klein, Andrea Real Mattar, and Stephan Knobel, Boston Consulting Group, April 9, 2020, http://www.bcg.com/ publications/2020/managing-next-decade-women-wealth

2 “Women as the next wave of growth in US wealth management,” McKinsey & Company, July 29, 2020, www.mckinsey.com/industries/financial-services/ourinsights/women-as-the-next-wave-of-growth-in-us-wealth-management#

3 Women and wealth, RBC Wealth Management, 2020, www.rbcwealthmanagement. com/us/en/cmp/women-and-wealth

4 Neil Stewart, Professor of Behavioural Science, Warwich Business School, “Are women better investors than men?,” June 28, 2018, https://www.wbs.ac.uk/news/are-womenbetter-investors-than-men/



Christy L. Watkins, CFA

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