In 2021, Fidelity Investments analyzed the performance of 5.2 million self-directed investment accounts over a ten-year period. Women outperformed men by an average of 40 basis points, or 0.4 percent, a year. That difference may sound small. But in investing, small differences compounded over long periods matter.
Fidelity was not the first to notice a difference in how men and women invest.
Research by Brad Barber and Terrance Odean found that men traded significantly more frequently than women, and that the additional trading reduced their net returns. Fidelity’s later research also found that women investors were more likely to say they stayed the course when markets declined.
The picture that emerges is interesting. Women tend to trade less, hold longer and are less likely to react to every movement in the market. It turns out, we can be pretty good at putting money to work.
But this is not only an investment story.
For years, researchers have also studied what happens inside households when women have greater control over financial resources.
The World Bank has documented evidence from countries including Bangladesh, Brazil, Côte d’Ivoire, Ghana, Mexico, South Africa, China and the United Kingdom showing that when women control a greater share of household income, spending tends to shift in ways that benefit children and families. More money goes towards things like food, education, health, nutrition and housing.
The contexts differ, and I would be careful not to turn this into another stereotype that women are somehow naturally more responsible with money. The point is that there is evidence, across very different settings, that when we have greater control over financial resources, the benefits can extend well beyond us.
And that makes the next set of numbers difficult to ignore.
Because when we move from controlling money to asking for capital to build businesses, the picture changes.
Harvard Business Review reported in 2023 that companies founded solely by women received less than 3 percent of venture capital investments.
Gusto found something similar from a different angle. Among businesses started in 2022, 14 percent of male owners received at least some funding from private capital investment. For women, it was 6 percent.
Men were receiving private capital at 2.3 times the rate of women. And importantly, Gusto found that the disparity could not simply be explained away by the different kinds of businesses men and women were starting.
So we arrive at a strange contradiction.
When we have money to put to work, there is evidence that we can use it effectively. Yet when we need capital to build, we are less likely to receive it.
There is another layer to this.
Women themselves may underestimate their financial ability. In Fidelity’s 2021 research, only a third of women said they felt confident making investment decisions. Seventy percent said they needed to know more about choosing individual stocks.
We were outperforming and underestimating ourselves at the same time.
Confidence matters. Financial knowledge matters. We should absolutely continue learning, investing and becoming more comfortable making financial decisions.
But confidence cannot explain the entire capital gap. Access matters too. Who gets funded matters. Who gets to sit across the table from investors matters. And who gets the opportunity to turn a good idea into something much bigger matters.
This is why I think the conversation about women and money needs to become broader. We know something about what can happen when women have greater control over financial resources.
We invest. We put money into our households. We educate our children. We improve health and nutrition. We start businesses. And in many cases, the impact of that money travels far beyond us. So perhaps the economic question is no longer simply whether we know what to do with money. There is enough evidence to suggest that we do.
The more interesting question is what becomes possible when more capital reaches our hands.
Imagine what we could build.
Until the next note,
– STB
Notes with STB | A content series exploring mindset, money and business.
Sources:
- Fidelity Investments (2021), Women and Investing Study – analysis of 5.2 million self-directed retail accounts, January 2011–December 2020.
- Fidelity Investments (2023), research on women, investing and market volatility.
- Barber, B. & Odean, T., Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment.
- World Bank, World Development Report 2012: Gender Equality and Development – evidence on women’s control of household resources and investment in children’s human capital.
- Solal, I. & Snellman, K. (2023), For Female Founders, Fundraising Only from Female VCs Comes at a Cost, Harvard Business Review.
- Gusto (2023), The Rise of Women Entrepreneurs.
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