75% of women who are actively investing for retirement say they have continued to contribute despite market volatility, according to a new survey from Ellevest, an investment platform for women. This is compared to only two-thirds of men who continued to make constant pension contributions during the stock market crisis.
The survey, which involved nearly 2,500 people aged 18 and over and was conducted in August, is in line with other reports showing that women tend to be better at staying calm and being disciplined and practical to investments.
For example, last year Vanguard released a report on its pension plan data showing that women traded their accounts about 40% less than men. It’s a strategy that pays off: A 2021 study by Fidelity Investments found that over the past 10 years, women have on average outperformed their male counterparts by 40 basis points or 0.4%. It might seem small, but it can increase over time.
Investors suffered a tonne of volatility this year. After starting 2022 at record highs, the S&P 500 fell into a bear market in June. While the index, which is commonly used as a benchmark to measure overall stock performance, rallied over the summer, it plummeted once again and is currently down around 23% for the year.
The pain may not be over. The Federal Reserve raised interest rates by three-quarters of a percentage point this week for the third consecutive time. Interest rate hikes are meant to keep the spiral of inflation in check, but they also tend to curb the price of financial assets such as stocks and cryptocurrency. Goldman Sachs just cut its year-end target for the S&P 500 by around 16%.
But for the most part, women stick to their long-term plans despite the ups and downs of the market – a strategy that financial advisors say is the way to go.
How men and women react to the volatility of the stock market
The fact that so many women who are investing for retirement have continued to contribute despite the rollercoaster movements of the stock market is indeed good news. Even though the financial markets now look tough, compound interest – the money that accrues from an initial investment over time – guarantees everything except that the investment now will pay off in the long run.
Earlier this year, Fidelity wrote that $ 10,000 invested at that time growing 9% annually with no additional contributions would be worth about $ 15,000 over five years, $ 24,000 over 10 years, $ 56,000 over 20 years and $ 133,000 over 30 years. (Wondering where the 9% increase came from? That’s roughly the historical average return of the S&P 500.)
Meanwhile, 77% of women said they had not withdrawn money from the market in the past year, according to Ellevest. This is slightly higher than 72% of men who said the same.
This is not all good news for women. They are still half as likely to invest as men, with 36% of women claiming to invest currently versus 63% of men. The new poll also shows that only 38% of women said they felt concerned about market volatility versus 58% of men. But, of course, if fewer women invest, it makes sense that women in general are less likely to be worried about volatility.
The main point is that women who invest seem to be more likely to put into practice the strategies that have proven effective for long-term success with their portfolios. These strategies include not reacting to market news and keeping the money invested even when it is scary.
The latter is especially important: the stock market’s best days tend to happen just during its worst days, which means that if you pull out when you’re anxious, you may miss out on the swings.
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