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Mar 4, 2019

Itís the Results that Count: Women, Confidence, and Competence

by Barbara Stewart

Barbara StewartWhen I grew up in a traditional family: my Dad handled everything to do with the family money. My Mom said she knew nothing about financial matters. My Dad loved to brag about his stock picks and how much money he made on his winners. My Mom boringly put all of her savings from her part-time job into government bonds. Guess which one of my parents had the winning strategy at the end of the day?

Well, we all know that stocks outperform bonds over longer periods of time. But not if you:

a) trade up a storm incurring huge trading costs along the way and/or

b) act irrationally and go to cash or place one big bet.

That was my Dad. After nearly 50 years of indulging in his passion for stock trading, he put his entire retirement account in one “solid” gold stock just before he died. That stock promptly plummeted and let’s just say there wasn’t much left for my Mom. It was a blessing (not in disguise) that she had invested her own account conservatively.

Is this story typical of how all women and men approach money management? Of course not…but I do think it illustrates that financial confidence (or at least the outward appearance of financial confidence) doesn’t really matter when it comes to investing results.

My research shows that women tend to downplay their financial abilities when asked. Education should obviously be a major determinant of confidence, but I have observed that even some of the most financially educated and capable female professionals will put themselves down when describing their own skills.

Do you self-assess as confident?

From my perspective, asking women and men if they self-assess as confident is not useful. It’s time for some new survey questions!

Take a close look at any survey put out by a large financial institution. You will normally find a question along the lines of: “How confident are you in your ability to understand investment products?” Now pay attention to the response boxes. Is one of the options “Don’t know”?

In shocking news…

How about this gem hidden inside a 2018 FINRA report? “Women may answer “Don’t know” more often when surveyed. This could result from women being more open to assistance or less confident than men, or it could reflect men being overconfident in their self-reporting. After removing respondents who answer “Don’t know” from the analysis, the gender gap in financial literacy narrows for boomers and gen-Xers and nearly disappears for millennials.”

If banks want to empower young female investors why not highlight this positive news?

The dangers of confidence

A 2014 Harvard article “The Dangers of Confidence” discusses the problem with perpetuating this damaging stereotype:

“…much of the literature and the popular writings in this area seem to focus on trying to enhance confidence in women. So in other words, they try to make women more like men. The world will be a much better place if we manage to make men more like women, because the problem is not that women lack confidence—but that men have too much of it.”

It’s time for the financial industry to think more progressively about how to access accurate information about investor behaviour. Self-reported information is never as insightful as looking at what people actually do.

Are you a competent investor?

Aha! Now we have a more useful question.

From the same Harvard article: “So people need to understand that the goal is to know how competent others are. We don’t really care how confident they are.”

As it turns out, whether or not they “feel confident”, women are in fact competent investors, and multiple studies show that!

1.          This 2013 Forbes article references the high-level findings from a study conducted by German Comdirect Bank and the DAB: “The study revealed that 58% of men rated their financial understanding as good or very good, but only 47% of women. Furthermore, a large sample of almost half a million private portfolios demonstrates that in 2007 and the crisis year of 2008, women did 4 to 6% better than men.”

2.          Fidelity looked through eight million investment accounts in 2016 and according to this piece “Who’s the Better Investor: Men or Women?”: “…it was found that women’s investments earn 0.4% more each year on average, women also save more each year as well.”

3.          A June 2018 study by Warwick Business School in the U.K. showed “Analysis of 2,800 investors found that not only did the female investors outperform the FTSE 100 over the last three years but they also outshone their male counterparts. While annual returns on investments for men were on average a marginal 0.14 per cent above the performance of the FTSE 100, annual returns on the investment portfolios held by women were 1.94 per cent above it. This means returns for women investing outperformed men by 1.8 per cent.”

How can we find out about levels of financial competence? We can analyze data on actual investing behaviour.

Moving forward, machine learning will allow financial institutions to crunch the data about investors and gain insights into their evolving investment behaviour patterns in real time. And data-driven analytics can be used to access a deeper understanding of female (and male) financial behaviour using social media patterns and mobile usage.

A call to action for all women

We need more data on your investing behaviour. If you haven’t yet started investing, just do it!

The best way to get comfortable is to practice. Keep it simple. Buy a stock. Sell a stock. It won’t take long before investing becomes a habit.

My contribution to XTIVA’s report “WealthTech Trends to Watch in 2019”:

“The biggest wealthtech trend for 2019 will be women and millennials who are “getting started” investing through non-traditional channels. Instead of going to a standard broker or wealth manager, I think we will see 50% year-over-year growth in women and 18-35 year olds who will make their first ever investments in one of two new ways. The first is online Artificial Intelligence (AI) powered websites like Canada’s Wealthsimple, and there are many other examples globally. The other is social trading platforms, like eToro, Shareville or Canada’s Voleo.

Based on my global research, I would estimate that usage of these alternative, tech-driven investment platforms is highest in the Nordics and Southeast Asia, where up to 40% of women of all ages (and 40% of young men) are trying these solutions. I am not sure how much higher this is likely to go in these regions; instead I think that we will see most of the global growth occur as other regions catch up to these leaders.

It is critical to note that we don’t (yet) know if people who start on the alternative investing platforms stay on them forever, or over time move back to more traditional ways of investing. As far as I can see, it almost doesn’t matter: People who historically have been less likely to invest are now going to get started!”

It’s the results that count!

We are on the cusp of a global social movement for female investors. This will have major implications for both the make-up and activity of the stock market as well as the data set for female investing behaviour.

When it comes to women and financial aptitude, actions speak louder than words. Let’s measure the results.


Barbara Stewart, CFA is one of the world’s leading researchers on women and finance. Barbara is an advocate for women, for diversity, and for financial education, both in public and as a consultant using her proprietary research skills to help global financial institutions seeking to transform themselves. Barbara is a frequent interview guest on TV, radio and print, both financial and general interest, as well as a former columnist both in print and online for Postmedia newspapers in Canada. Barbara is a contributor to the CFA Institute’s Enterprising Investor website. For more information about Barbara’s research, please see