Finance and investing still has something of an image problem.
All too often, it’s seen as being largely for those who are “male, pale and stale”.
Women make up a much smaller proportion of investors, and there’s concern for those who have fallen into the “gender investment gap”.
Females aged between 21 and 53 are thought to have half the amount set aside, compared with men in the same age group, for example.
But change is coming – research shows that, since the pandemic started, women are changing their approach to investing.
They’re also getting wealthier – women are expected to control 60% of the UK’s wealth by 2025.
This makes it more important than ever to pay attention to this under-served group of investors.
Do women and men invest differently?
Men are seen as the big risk-takers, more likely to look for investments that promise big returns but also carry greater uncertainty.
Women, on the other hand, are more likely to opt for the safer option of lower returns but a better chance of a positive outcome.
In practice, it isn’t always this clear cut.
But, according to Fidelity International’s Global Women and Money survey, women are more likely to describe themselves as cautious investors and less likely than men to describe themselves as confident or ambitious.
Can being more risk-averse impact returns?
Research from Hargreaves Lansdown has found women are more likely to keep their money in cash, rather than investing in stocks and shares.
This may seem like the safer option, but it also puts returns at risk of being eroded by inflation.
Patience, not panic
Caution can also be a good thing. Too much confidence – overestimating your abilities and ignoring risk factors – could harm your investments.
Some studies have highlighted men’s tendency towards overconfidence.
For example, one research paper found overconfidence in men led to “overtrading” – buying and selling too frequently on investment accounts. This reduced their net returns by about 2.65% per year.
Similarly, studies have shown women to be more patient investors and less prone to panic in tough times – a tendency that’s generally more suited to long-term investing.
Women are expected to control 60% of the UK’s wealth by 2025.”
Figures from Boring Money suggest women hold funds for 10.7 years on average, compared with 8.3 years for men.
Patient investing is particularly relevant when it comes to turbulent spells in markets.
When stock prices fall quickly we often see panic-selling from investors, but this can be the more damaging approach in the long run.
Downturns are only temporary, so staying calm – and invested – tends to be better for long-term returns.
Values more important for women
One especially interesting way in which women appear to differ is a marked interest in sustainability.
Research shows decision-making for women investors young and old isn’t just influenced by how big the final investment pot is.
They are more likely to take into account the world around them and want their portfolios to include environmental, social and governance factors.
A UBS sentiment survey found seven out of 10 women investors take sustainability into account, compared with 58% of men.
This makes women an incredibly influential, socially conscious group of investors for the future.
Undervaluing women’s voices in investing is a big mistake.
As financial planners, we have a responsibility to all our clients to help them make informed decisions.
At AAB Wealth, we make sure the advice we give and the products we discuss are tailored to people’s personal circumstances, approach and goals.
Andrew Dines is a director and chartered financial planner at Aberdeen-based AAB Wealth