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Women investors: four tips

You may not be investing aggressively enough, and that isn't good when it comes to growth.

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In a recent Fidelity study, nearly 30% of women were more interested in preserving wealth than higher returns, versus 20% of men.1 Another Fidelity survey found that even as the stock market began to soar in 2012, those women who were the sole decision makers for their families added low-yielding CDs, money market funds, or cash to their portfolio, while male decision makers put their money into U.S. stocks.2

A more cautious approach can have pros and cons. In volatile times, being a bit more conservative may be a plus, but investing too little in stocks and other riskier investments, or avoiding them altogether, has its own risks: It can jeopardize your ability to grow your savings.

So, how do you find the right balance? Here are four strategies to help women (or any investor) to be a little less conservative, and build investment portfolios that are more oriented toward long-term growth.

1. Diversify.

Markets go up and down. One day your investments may be worth one amount; a month later, less—or more. That’s how it works. You may not be comfortable with this, but there’s a way to help dampen the impact of market swings on your portfolio in either direction—up or down—while still securing solid returns. How? With a well-diversified mix of investments.

The basic idea of diversification is to build a portfolio with an investment mix, or “asset allocation,” of stocks, bonds, and short-term/cash-like investments whose returns don’t typically move in the same direction—or that might even move in the opposite direction. Even if some of your investments are declining, the rest of your portfolio could be growing. With this approach, you can potentially offset the impact of poor market performance on your overall portfolio. It is important to note that diversification or asset allocation do not ensure a profit or guarantee against loss.

Consider the example below. It shows how three hypothetical portfolios would have performed during a particularly challenging time: the 2008 financial crisis and the recovery that followed. It compares a well-diversified growth portfolio of 70% stocks, 25% bonds, and 5% short-term investments; a portfolio of 100% stocks; and an all-cash portfolio.

What happened from the start of the crisis in January 2008 till five years after the stock market bottomed, in March 2009?

  • The all-stock portfolio dropped most sharply (49.7%) but also bounced back most sharply (162%).
  • The diversified mix lost less in the downturn than the all-stock portfolio, and showed its strength over time by delivering an almost 30% gain, very close to the all-stock portfolio's roughly 32%.
  • Cash, meanwhile, which eked out a positive 1.6% gain during the darkest days, was left in the dust during the recovery and over the five-year period, when it gained 2%.

This is what diversification is about. The primary goal is to manage volatility by choosing investments that tend not to move in sync with each other.

Your investment mix should also match your goals, time horizon, and risk tolerance, or how comfortable you are with changes in the value of your investment. To find the mix of investments that is most suited to your goals and risk profile, use Fidelity Portfolio Review (login required).

2. Remember: Stocks offer the most growth potential.

U.S. stocks have consistently earned more than bonds over the long term, despite ups and downs. Take a look at how $100 (see chart, right) would have grown over the history of the stock market (S&P began tracking performance in 1926). During this time period, stocks returned an average of almost 10% annually, bonds 5.3%, and short-term investments 3.5%, before inflation.3 Of course, it wasn’t a straight line up for all, but this example illustrates that stocks typically offer more potential for growth. That's why including stocks or stock mutual funds as one element of a diversified portfolio is so important.

3. Check in—but not too often.

It’s important to check your mix periodically and make changes when necessary. If your investments have grown or have been through a variety of market changes, that can throw your mix of stocks, bonds, and short-term investments out of alignment—and jeopardize progress toward your goals.

Keeping an eye on your investments doesn’t need to be a full-time job. While you can almost never be too diligent about monitoring your family's household income and expenses, bills, and credit card debt, your investment decisions can suffer if you monitor your investments too often or too closely.

In fact, studies by behavioral finance experts found that investors who checked their portfolios monthly were more likely to move them in a more conservative direction than those who reviewed them annually.4 (See chart, right.) This reaction, which they call "myopic loss aversion," is based on a very human tendency to avoid losses because the pain we feel from a loss is twice as powerful as the pleasure we feel from a gain.

"Myopic loss aversion basically asserts that the more frequently we evaluate our investment portfolios, the more often we see the volatility in the losses," says Dirk Hofschire, CFA, senior vice president of Asset Allocation Research at Fidelity, "and because we feel those losses more painfully, this prompts us as investors to seek less risky, more conservative investments; in other words, to favor bonds over stocks."

How to avoid the near-sighted loss aversion trap? Most investment professionals recommend monitoring your investments and rebalancing annually, or whenever your financial circumstances change, rather than on a daily or even monthly basis. As a guideline, Fidelity also suggests rebalancing your portfolio if any of your investment allocations move away from your target by more than 10 percentage points.

4. Turn to a professional.

The key to creating an appropriate investment portfolio is coming up with a good strategy and sticking with it. That’s where women may have a distinct advantage, because they are more willing to seek the input of others—a partner, friend, or adviser—to help with their decisions.

In fact, studies show that while men tend to overestimate their own financial competence, women seek information and advice—and are more likely to work with a paid financial adviser than men are (53% versus 44%). They also focus more on comprehensive financial planning, while men tend to focus on investment returns. Fidelity’s 2012 Millionaire Wealth and Women study found that women listed the top three benefits of working with an adviser as: “Helps me protect my wealth,” “Prevents me from making big mistakes,” and “Gives me peace of mind.”5

What does this mean? If your instincts tell you to get more help and information, do so. Work with a trusted adviser or your investment firm's representatives and Web site tools to understand the investments you own or that you need to add to your portfolio. And don't underestimate the value of the skill and experience that the manager of a diversified mutual fund, target-date fund, or managed account brings to the table. These investment options can give you a ready-made, diversified portfolio if you don't want to build your own.

Just right—not too conservative or aggressive

Finding the right balance between conservative and aggressive means an investment portfolio that is oriented toward long-term growth, yet doesn’t make you nervous when they markets go up and down.

Learn more

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Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information.  Read it carefully.
Diversification and asset allocation do not ensure a profit or guarantee against loss.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

1. Fidelity 2013 Couples Study: The Women.
2. Fidelity Millionaire Wealth and Women Executive Summary, November 2012.
3. Data Source: Ibbotson Associates, 2013. Past performance is no guarantee of future results. The asset class (index) returns reflect the reinvestment of dividends and other earnings. This chart is for illustrative purposes only and does not represent actual or future performance of any investment option. It is not possible to invest directly in a market index. Stocks are represented by the Standard & Poor’s 500 Index (S&P 500® Index). The S&P 500 Index is a market capitalization–weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. Bonds are represented by the U.S. Intermediate Government Bond Index, which is an unmanaged index that includes the reinvestment of interest income. Short-term instruments are represented by U.S. Treasury bills, which are backed by the full faith and credit of the U.S. government. Stock prices are more volatile than those of other securities. Government bonds and corporate bonds have more moderate short-term price fluctuations than stocks but provide lower potential long-term returns. U.S. Treasury bills maintain a stable value (if held to maturity), but returns are only slightly above the inflation rate.
4. Behavioral Finance: Impact of Loss Aversion on Asset Allocation, March 2013, Dirk Hofschire, CFA, Senior Vice President, Asset Allocation Research, Fidelity Investments.
5. Fidelity Viewpoints, What women investors are doing right, November 21, 2013.
The MSCI EAFE (Europe, Australasia, Far East) Index is a market capitalization–weighted index that is designed to measure the investable equity market performance of value stocks for global investors in developed markets, excluding the U.S. and Canada.

Past performance is no guarantee of future results. The asset class (index) returns reflect the reinvestment of dividends and other earnings.   This chart is for illustrative purposes only and does not represent actual or future performance of any investment option.  It is not possible to invest directly in a market index.


Stocks are represented by the Standard and Poor's 500 Index (S&P 500® Index).  The S&P 500® Index is a registered service mark of The McGraw-Hill Companies, Inc., and has been licensed for use by Fidelity Distributors Corporation and its affiliates. It is an unmanaged index of the common stock prices of 500 widely held U.S. stocks that includes the reinvestment of dividends.


Bonds are represented by the U.S. Intermediate Government Bond Index, which is an unmanaged index that includes the reinvestment of interest income.


Short-term instruments are represented by U.S. Treasury bills, which are backed by the full faith and credit of the U.S. government.  


Inflation is represented by the Consumer Price Index, which monitors the cost of living in the United States.


Stock prices are more volatile than those of other securities. Government bonds and corporate bonds have more moderate short-term price fluctuations than stocks but provide lower potential long-term returns. U.S. Treasury bills maintain a stable value (if held to maturity), but returns are only slightly above the inflation rate.

Portfolio Review is an educational tool.

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