The biggest financial mistake women make: Not getting in the game

Financially and otherwise, the deck tends to be stacked against women.

The wage gap, which stood at 20 percent in 2017, is unlikely to close in the U.S. for another 40 years, according to an analysis by the Institute for Women's Policy Research.

While they wait, women might aim to close a gap over which they have more direct control: the investing gap. When compared with men, women are much less likely to invest their savings — and we miss out on significant wealth as a result. In a recent survey from Fidelity Investments, only 29 percent of women said they see themselves as investors. That needs to change.

Because of the wage gap, even if women save a greater percentage of our income than men — and research repeatedly shows that we do — we accumulate less money. We're also more likely to spend time out of work, caring for children and other family members.

As a result, a study from the National Institute on Retirement Security found that women are 80 percent more likely to be impoverished in retirement.

Any advice to save more falls flat; many women are undoubtedly saving as much as they can. But if you are not also investing that savings in the stock market, you are only widening the gap.

Women tend to lack confidence when it comes to investing.

"When I ask people to self-assess their economic knowledge on a scale of one to seven, women are less likely than men to pick high numbers, in particular the highest," said Annamaria Lusardi, a financial literacy expert and economist at the George Washington School of Business.

But perhaps there's money to be made by knowing what you don't know: Women are actually good at investing; better, arguably, than men. A separate Fidelity Investments analysis of client accounts published in 2017 found that on average, women outperformed men by 0.4 percent. In the U.K., a behavioral economist at the Warwick Business School found an even larger advantage, with women outperforming men by 1.8 percent.

Research shows one reason for men's underperformance is actually overconfidence — they tend to trade investments more frequently and make riskier decisions. Women, on the other hand, tend to seek out financial advice and invest for the long term, trading less frequently as a result.

The downside to women's lack of confidence is that we tend to be more risk-averse.

There's no doubt that investing is risky — but in many ways, not investing is even riskier. There's a cost to holding cash, and over time, it can add up to six or even seven figures in lost returns.

Stacy Francis, a certified financial planner and president of Francis Financial in New York City, said she walks overly conservative clients through models to prove this out.

"We actually show them year by year how their nest egg will be valued over the next 35 years, based on their current spending: 'This is how much you have invested, and this is the portfolio you feel comfortable with. By 81, you will have nothing left and you'll be moving in with your children,' " Francis said.

It's hard to imagine that doesn't drive the point home, but she also shows them another scenario with a more balanced portfolio that easily gets them to age 95 or beyond without sleeping on their offspring's couch. You can loosely mimic this process on your own with a retirement calculator, playing with different expected returns to see how long your money will last.

There are plenty of complex investing strategies, and women are just as capable of mastering them as men. But the truth is, we don't have to — and doing so could actually waste time and money.

If you have a 401(k), you are already an investor — likely in mutual or index funds, which are baskets of investments designed to make getting into the market very easy.

You can put your entire account balance into a target-date mutual fund — a common 401(k) investment — and it will automatically adjust for risk as you approach your planned retirement age.

For money in other investment accounts, such as an IRA, you can opt for the same type of fund. Or, if you want some investment guidance on the cheap, you can open your account at a robo-adviser, which is an automated portfolio management service.

Finally, you might find it motivating to align your investments with your values, by choosing socially responsible investments. SRI index funds will either exclude certain industries — tobacco, for example — or include companies that meet specific criteria.

One idea? Invest in other women, Francis said: "There are great mutual funds that will invest in companies that support women, or that put women in the CEO room."

And yes: Men can benefit from these investing strategies, too.

Arielle O'Shea is a writer at NerdWallet. E-mail: aoshea@nerdwallet.com. Twitter: @arioshea.