It’s often thought that women tend to be more financially risk averse than men.
But is this really true? It depends on who you ask.
“Women in general are risk averse,” says Diane McCurdy, CFP, an advisor. “That needs to shift if you want to grow.”
Some research does support this. When they’re job hunting, women often accept offers more quickly than men, for example. This can actually contribute to the gender pay gap, because this often means they don’t negotiate as aggressively or – at all – and may accept a lower compensation package than their male counterparts.
Women’s lower risk tolerance can also impact their appetite for investing. Case in point: If women invested at the same rate as men, it’s estimated that women would globally add USD $3 trillion dollars in investments.
McCurdy points out that while women have made some progress in other areas that can impact their financial goals, like steps toward equality in the workplace, finding the right level of risk tolerance for their situation may be the next frontier.
“Looking forward, what women need to look at is their risk level,” she says. “When they’re investing, are they looking at the proper risk? Are they comfortable with risk? Have they really evaluated it?”
It also possible that women might not be more risk averse than men. They might just be more “risk aware.”
Being “risk aware” describes the way that some investors might be slower to invest, doing more research and carefully weighing up the potential upsides and downsides before they decide to take a risk.
When it comes to women specifically, there are some reasons why they may be more “risk aware” than men.
This higher “risk awareness” might explain the results of a University of Sydney study that found female investors tend to outperform male investors.
“Women spend more time researching their options than men, are better at matching their investments to their life goals, tend to trade less and when they do, remain calmer during the storms that unnerve male investors on the financial high seas,” the study says.
Why might women be more financially risk averse than men?
Research from the University of Bath suggests that women can be more risk averse because they are “more sensitive to the pain of any losses” that might occur. The study links this to men’s tendency to be more optimistic as well.
“Differences between the sexes in risk taking can explain why women are less likely to be entrepreneurs, are underrepresented in high-paying jobs and upper management, and less likely to invest their wealth in equities markets than men,” says researcher Dr. Chris Dawson, who conducted the study. “When thinking about risky choices, people tend to assess the probability of losing something alongside an evaluation of how painful that loss would be. I found that women take less risks than men as they focus more on the possibility of losing and anticipate experiencing more pain from potential losses.”
How does risk tolerance impact women’s finances?
Risk can equal reward – and not choosing to take that risk may mean you miss out on the potential for greater growth than in safer choices with a small upside.
“If you’re an entrepreneur, you need to be able to look at borrowing from the bank. You can’t save it fast enough to scale.” says McCurdy as an example. “Women often don’t do that.”
This could also look like choosing to keep your savings in cash rather than investing in the stock market or choosing “safer” but lower growth options like bonds. It could even be choosing not to apply for a higher paying job because of a fear of failure.
It can even be part of the reason for the “gender pension gap.” This describes the way that for every dollar a man has in retirement income, a woman only has 83 cents, according to a 2024 report published by Ontario’s Pay Equity Office.
Of course, it can also be a good idea to build a plan that includes a balanced mix of assets and strategies to help reduce any negative outcomes and help you navigate market volatility.
How can women grow their wealth in a way that they are comfortable with?
Everyone can benefit from connecting with an advisor who can work with them to create a plan to help build their wealth in a way that they’re comfortable with.
An advisor can also help you calculate your own individual risk appetite, which can be determined by factors like your age, your financial situation and your goals for the future.
Women (and men) could also consider spending some time learning more about investing on their own, whether that’s listening to a podcast, reading a book or articles on investing.
For example, you may feel more comfortable about investing if you’re more aware of how to understand your own risk tolerance, how various investment strategies can work, and how it’s important to not let emotions rule your investment plan.
A good place to start could also be taking our investment personality quiz. This could help you decide what is right for you to invest in, given your specific circumstances and needs. If you’re already a customer, sign into your online account to get a sense of what your portfolio looks like now, and whether you might want make any adjustments.
If you are someone who falls on the lower end of the risk appetite spectrum, you might also consider exploring mutual funds or segregated funds. These are traditionally recommended when you want to diversify your portfolio and can reduce your risk.