Women Are Proven To Be Better At Investing Money, So Why Do We Avoid It?

This morning, Serena Williams announced that she has secretly been an all-out business mogul for the last five years, investing in 30 small companies since 2014. Announcing Serena Ventures, she shared the news on Instagram stating that she is on a mission to help companies that ‘embrace diverse leadership, individual empowerment, creativity and opportunity’.

While it shouldn’t be a surprise that one of the most iconic women in the world also has a diverse business portfolio alongside her 39 major competition titles, if the media reaction is anything to go by, it really is. Unfortunately, it’s still a standout moment when a woman proves to be well-versed in financial investments, with a common perception being that women are socialised to be more risk-averse than men.

'When it comes to investing, women think and act differently than men,' said Zalina Wälchli, wealth consultant at deVere Switzerland, 'when they do invest, women often opt for lower risk investments.'

On the surface, it makes sense that women might be deterred. More than men, we're socialised to follow the rules as we grow up, with greater consequences should we not. We’re taught to be palatable, conservative, and avoid behaviours that can disrupt the status quo, all things that, in adulthood, force us to make more reserved, safer financial choices.

Ironically, these can often be the choices that prove successful for long-term financial investment, but when it comes to the average woman – who hasn’t studied the endless finance jargon designed to keep us layman's out of the industry – that may wish to enter the seemingly roller-coaster world of investments, it serves as a barrier to entry.

It’s a contentious debate in the finance world, but the idea that women are more risk-averse than men sits on a wealth of research. One of the most intriguing being by scientists Elaine M. Liu and Sharon Xuejing Zuo. Studying two very different cultures in China, the women researched the behaviours of children in two culturally distinct populations, the matrilineal Mosuo – of whom the culture is based on kinship with the female line of a family, i.e. the family name comes from the mother – and the patriarchal society of Han.

As the two cultures come together to attend the same school, the scientists found that Mosuo girls were more likely to take risks than Mosuo boys, whereas the opposite was true for Han girls and boys. More interestingly, after spending time in a majority-environment, Mosuo children ‘adopt the risk preferences of the majority’. Attempting to prove that risk preference is shaped by culture and can change depending on environment, the research showed that patriarchal societies do in fact raise more risk averse women than men.

While there are many more studies that also provide this conclusion, the hypothesis has been countered many times, and in service of women. The idea that women are more risk-averse than men is often used to unfairly prejudice women in the finance industry, and according to a journal published by the American Economic Association, this perception is a ‘major cause of the glass ceiling in corporate promotion ladders’ and stereotyping by investment brokers can ‘disadvantage female clients.

Of course, taking the way women are socialised and using it against them in the finance industry is ridiculous. It stands to reason that women who take a vested interest in finance, so much so that they make a career of it, would develop the knowledge and reason to make financial judgements regardless of the gender norms they’ve been taught. One would hope those in the finance industry might make the same conclusion, but given that it provides a (ridiculous) reason to maintain a glass ceiling and pay gap for the sexist powers that be, maybe not.

The irony of all of this is that being risk-averse is actually financially beneficial for long-term investments. It may discourage the average woman from entering the market, but for those that do it has proven a course to success. ‘Study after study has found that when it comes to managing investments, women actually outperform their male counterparts,’ says Anna Sofat, financial advisor at Addidi Wealth.

Click through to see all of the companies that Serena has invested in, and what they do...

‘By and large, it’s not about doing research on stocks, or having a good gut instinct, or knowing what’s going on in the biotech industry,’ agrees Whitney Morrison, financial planner at Wealthsimple, ‘For people to build wealth in the long term, there is one trait that matters the most: being disciplined.

‘It’s important to know that trying to time the market—selling before you think it’s going to crash, buying when you think it’s going to rally—is historically very unsuccessful,’ she told Goop, ‘What’s more successful is having a financial plan and sticking to it regardless of what’s going on. Men are more likely to chase performance and to behave as if they can outperform the market. Over the long haul, that strategy hasn’t proven to be successful.’

So, if we’re actually better at investing, it seems a no-brainer we should be doing it more. Where to begin? According to Whitney, passive investing and using technology like investment and financial advisor apps can be a great introduction. Moneywise advises using apps like Moneybox or The Best Brokers Stock Market Gam. Then, Whitney says, start small. 'I think a great way to get acclimated is to start by investing a small amount,' she said, 'Money that, if the market goes down, you won’t panic about. Once you get your sea legs and you understand how the markets move, you can put more in.'

Of course, if you want to take a more active role in the finance industry, the best guides to research investing for dummies include Investopedia, iGrad and How The Market Works. For Betty Simkins, department head of finance at Oklahoma State University, they're a great place to start and what her colleagues recommend to their students. For a 101 in all things stocks, she recommends Edward Jones website.

So give it a try, you never know, since we are the better investors, you could end up with a Serena William's level of business portfolio someday.