Stock Market Volatility: How Female Investors Cope With Deflation
Women won’t let something like the volatility of the stock market intimidate them.
75 percent of women who actively invest for retirement said they have continued their contributions despite market volatility, according to a new survey from Ellevest, an investment platform for women. That’s compared to just two-thirds of men who continued to make steady retirement contributions during the stock market downturn.
The survey, of nearly 2,500 people 18 and older, and conducted in August, is in line with other reports showing that women tend to be better at keeping their cool, maintaining a disciplined approach and not interfering with investing.
For example, last year Vanguard released a report on its retirement plan data showing that women trade in their accounts 40% less than men. It’s a strategy that pays off: A 2021 study from Fidelity Investments found that over the past 10 years, women, on average, outperformed their male counterparts by 40 basis points, or 0.4%. This may seem small, but it can build up over time.
Investors have endured a ton of ups and downs this year. After kicking off 2022 at a record low, the S&P 500 plunged into a bear market in June. While the index, which is commonly used as a benchmark to measure the performance of stocks in general, has seen an uptick over the summer, it has fallen again and is currently down about 23% for the year.
The pain may not end. The Federal Reserve raised interest rates by three-quarters of a percentage point this week for the third time in a row. Interest rate increases are meant to control spiraling inflation, but they also tend to curb the prices of financial assets such as stocks and cryptocurrencies. Goldman Sachs cut its year-end target for the S&P 500 index by about 16%.
But for the most part, women stick to their long-term plans despite market volatility—a strategy that financial advisors say is the right way to go.
How do men and women react to stock market volatility?
The fact that so many women investing for their retirement have continued their contributions despite roller-coaster-like moves in the stock market is really good news. Even if financial markets seem volatile now, compound interest — the money that accrues from the initial investment over time — all ensures that investing now will pay off in the long run.
Earlier this year, Fidelity wrote that $10,000 invested at the time that was growing 9% per year without any additional contributions would be worth about $15,000 in five years, $24,000 in 10 years, $56,000 in 20 years and 133,000 dollars in 30 years. (Are you wondering where the 9% increase comes from? It’s roughly the historical average return for the S&P 500.)
Meanwhile, 77% of women said they had not withdrawn money from the market in the past year, according to Elvist. That’s slightly higher than the 72% of men who said the same.
Not all news is good for women. They are still half as likely to invest as men, with 36% of women saying they currently invest versus 63% of men. The new survey also showed that only 38% of women reported feeling concerned about market volatility versus 58% of men. But, of course, if there were fewer women investors, it would make sense that women in general would be less likely to worry about volatility.
The main takeaway is that women who invest appear to be more likely to practice strategies that have proven successful in achieving long-term success in their investment portfolios. These strategies include not responding to market news and keeping your money invested even when it’s scary.
The latter is especially important: The stock market’s best days tend to happen on its worst days, which means if you quit when you’re anxious, you’re likely to miss out on the upsells.
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