Our Insights

About personal finance, investments and markets.
June 21, 2017

Should women invest differently?

The answer is emphatically yes. While the basic investing rules are the same for everyone, women often are in a different financial position and this needs to be reflected in a financial plan. Women live longer than men, typically earn less over a lifetime and can often expect to be solely responsible for their finances in their later years. Yet many are uncomfortable doing so. Here we want to highlight how we can empower you to take charge of your own financial future.

Men are from Mars, Women are from Venus

When John Gray famously wrote Men Are From Mars, Women Are From Venus, he was focused more on love than money, yet somehow the analogy also works fairly well in the world of finance. It would be wrong to assume that men and women are the same when it comes to investing and there are many important reasons why:

  1. Female retirees in Germany receive 57% less than their male counterparts. This gap is largely driven by lower pay levels, higher percentage of part-time work and more frequent breaks from work (raising kids).
  2. Longer life expectancy. The average life expectancy for women in Germany is 83 years compared to only 78 for men. Most women will outlive their partners! In addition, what the above quote number hides is that a women age 65 today can expect to live at least until nearly 87.
  3. Less knowledge about finances due to traditional role model. Earning money and investing is still seen today as a typical job for men. There is usually a ‘division of labor’ when the two partners come together at the table to discuss family finances. Men are more focused on investing and growing wealth while women tend to emphasize the day-to-day health of the household’s finances. Life has a habit of taking unexpected turns and statistics tell us that at some point – either via divorce or widowhood – women may be going it alone. Nobody is expecting you to be a professional investor but you should at least understand the basics in order to be well prepared and independent. Financial advisors can be great help but you should never delegate 100%. Trust is good but control is better and if you don’t understand what your advisor is doing you will quickly lose control.

The good news: investing is not so complicated. Even better, it is a good feeling knowing we are independent and can take our future in our own hands. If you have any questions, we are happy to help.

Important steps

A blog post cannot replace an in-depth conversation with a trusted advisor but we want to highlight here 5 points that everyone needs to think through to reach financial independence.

  1. Assess your current situation. If you want to plan for the future, you need to understand your current. What are your incomes, expenses, assets and liabilities?
  2. Define your personal goal(s). You need to think first what it is that you are trying to achieve. Set yourself a goal such as a certain income per month to maintain your standard of living, sending kids to university, charity, etc. From this goal you can work backwards and see how you need to plan your finances now.
  3. Choose the right asset allocation. Nothing determines more your long-term returns than the asset allocation mix. This is not as complicated as it sounds as there are only two major asset classes that you need to consider: equities for long-term wealth growth and bonds for safety.
  4. Choose the right products. Implement your asset allocation with the most efficient, lowest, cost and lowest risk products. For most investors, the right choice are broadly diversified ETF.
  5. Review and revise your plan. Like any other planning process, financial planning is a dynamic process and the decision you make are not carved in stone. However, there is no need to make frequent changes. If you do a check-up once a year, this will be enough for most.