Women should remain calm and stay the course when investing

By Opinion Time of article published Sep 1, 2020

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Studies have shown that women behave differently to men, particularly when it comes to their financial decision-making.

For years, assumptions were made around the “fight and flight” stress response discovered by Walter Canon in the 1930s, which was applied equally to men and women. But more recent research conducted by Dr Shelley Taylor spanning over 30 years clearly shows the female response is far more cerebral and aptly termed “tend and befriend”. Social bonding releases the neuropeptide or hormone oxytocin (commonly known as the “feel good” hormone), which significantly reduces and alleviates the stress response. So how does this affect how women invest?

Women tend to rely a lot more on their instinct. They are more likely to hold back for longer to ensure that they have sufficient money set aside, that the investment is sound, and that they can trust the provider whom they have appointed to manage their investment. They are also more likely to discuss their options with others and “socialise” these options prior to jumping in. This trust isn’t only about trust in others, but also trust in themselves.

The women that I speak to often hold back on investing early, as they spend too much time questioning themselves. Whether it’s doubting the size of the initial investment, the fees or the investment options, this often results in them getting into the market later than their male counterparts with similar investment amounts.

But once invested, they tend to stick to their goals and are less likely to disinvest due to short-term volatility.

Research conducted both globally and locally shows that people who use a financial adviser tend to have up to two-and-a-half times more savings than those who try to do it on their own. Financial advisers look at the facts and then put together a plan to help their clients on their journey to financial success. They provide the reality check in determining what is and isn’t achievable given the investment amount and time frame.

By taking the emotions out of investing, financial advisers remove the obstacles of fear-based investing that often result in poor financial outcomes for clients. Because trust is very important to women, they may spend more time doing due diligence before appointing a financial adviser, but once they have, women tend to trust the advice.

Whereas their male counterparts may be more tempted to compare the returns on their investments to those of their peers, women tend to be more focused on their personal goals than those of their friends. Their ability to stay away from timing the market results in lower trading fees and better financial outcomes.

In the absence of a crystal ball, we can’t accurately time the markets. But what we do know is that allocating to the correct asset classes is the biggest driver of performance over the long term.

So how do we select the appropriate investment for our personal needs? When is the right time to start? How much do I need to start saving and investing? The answer is as soon as possible (today if you can), and no amount is too small.

Budgeting is essential. It forces us to work out how much we earn and how much we need to cover our living costs. By writing it down, we can also easily see what non-essential expenditure we are incurring and re-evaluate whether this is money well spent.

Appointing a financial adviser who can evaluate your circumstances and advise you about all your investments will invariably keep you on track and help you to stick to your goals. And then make sure that you choose an investment partner that you can trust.

Last, share your story with others. Women in South Africa now make up a significant part of the workforce and are increasingly becoming the main breadwinners in their households. We encourage you to take the time to share your challenges and successes with other women. Own your success and share your journey.

Florbela Yates is the head of Momentum Investment Consulting.


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