You save carefully, think twice before investing, and worry about market losses. Sound familiar? Discover why women experience investment hesitation and how to turn that caution into financial confidence.
Ever frozen right before clicking “invest” in a market-related investment product? That feeling isn’t random. Psychologists call it ‘loss aversion’. Loss aversion is a cognitive bias that makes losses hurt more than it makes gains feel good. Research suggests the psychological pain of losing can feel roughly twice as strong as the pleasure of winning. This feeling can therefore have adverse effects on your relationships, career and even your finances. In matters of money, loss aversion can make us play safely. An investor who is worried about losing money can end up pulling out the investment earlier without giving it the time needed to perform. Worse, she may end up not investing at all when there is a chance that it can grow well.
The other side
But being loss averse is not necessarily bad; sometimes feeling losses more can actually help us be more careful. A study from Warwick Business School found that women traded far less than men (about nine times a year versus 13 times a year for men) and earned 1.8% more per year over three years. This study doesn’t say that loss aversion is the reason, but it does suggest that this could be a clue, not proof, that suggests the same instinct of aversion to losses can protect us and hold us back.
However, there could also be other reasons for women being more loss averse than men. The ILO (International Labour Organisation) suggests that women are generally paid less than men across the world, and government data shows that women have a higher life expectancy. Women also take on caregiving roles which implies that their careers could be shorter or a bit unsteady. So if the runway is shorter, it's very natural that they be extra careful in financial matters.
Using loss aversion to win
How can women turn their natural instincts and their social situation into an advantage when it comes to money? The next time you freeze when thinking of moving savings out of say, RDs, into a SIP, try this :
Start small. Begin with an amount you would feel more comfortable investing. Alongside, build a fund for emergencies so you won't fear needing the money which you have invested in the market.
Spend a little time learning about money so it helps you stay calm during market volatility. Tracking the market's ups and downs can make the small losses feel bigger. Writing down your financial goals can calm you down and give you something to look forward to too.
Your cautious side isn’t holding you back. It’s a starting point.
At Kodeeswari, we’re building a community of one lakh women on the journey to saving ₹1 crore, one small step at a time. Join us and take your first step!
