Yahoo Finance More specific goals, less risk: How women approach investing differently to men
An investment gap between men and women is to be expected when you consider the many other gender gaps occurring on wealth accumulation.
There’s the 13.9 per cent gender pay gap, and a gap in retirement savings. There’s a gap in who is taking on the bulk of the unpaid caring and domestic duties at home (spoiler: it’s women), along with gender gaps in workforce participation.
ABS data also tells us that women are more likely to own or currently be purchasing their own home than men. It’s a gender gap of around 6 per cent for those aged 15 to 34, that slightly closes to around 3 per cent in favour of women when all age groups are factored in.
Online trading is making it easier for a broader range of people to get started on investing but wide gender gaps still exist in who is getting involved. eToro recently revealed the gender split on its investment platform is a massive 88 per cent male and just 12 per cent female.
Many women simply don’t have anything left over from their weekly expenses to invest – and if they do, many again are preferring to put it into bricks and mortar.
But for those that do have the means to invest in the stock market – regardless of how small the investment – are women generally doing it differently to men?
Yes, according to a number of experts and research studies we consulted. And they’re differences that may just offer some clues behind the separate studies indicating women are achieving better returns than men.
One such study came from the Warwick University Business School in 2018. It examined 2,800 investors and found that women outperformed their male counterparts over the three year period examined. Why? Possibly because women took a longer-term perspective than men, traded less frequently, and were less likely to indulge in a “lottery style” of investing (like speculative stocks), according to the report author Professor Neil Stewart.
Claire Mackay from Quantum Financial is an award-winning, independent financial advisor who works with plenty of male and female investors.
She’s hesitant to compare and contrast how men and women invest, but notes a few trends in the female clients she’s worked with.
For one, she said they ask thoughtful questions and don’t assume they understand everything. They’re not satisfied with a ‘just trust me’ attitude and have often put in so much work to attain financial security that they’re determined to ask insightful questions about what’s going on with their money.
Second, she says her female clients have a very clear ‘why’ behind their investing. Having clear goals means they are better equipped to make the financial decisions now. They don’t revert to generic goals like ‘growing wealth’ but rather establish clear, measurable goals in order to track their progress and determine a framework for making tough decisions. This helps avoid ‘analysis paralysis’ or ill-considered actions during volatile times
“My women clients all have clear purpose for their investing which serves them well in uncertain times,” she says.
Some research suggests women chose to invest differently to men by opting for more ethical and purpose-led investments. Philanthropy Australia CEO Sarah Davies recently noted that women are using impact investing to support their charitable giving, while men pursue such investing to replace their charitable giving. She also cited research that women are more likely than men to want to learn about impact investing.
Since the summer bushfires in Australia, this has manifested in more enquiries regarding stock and fund sustainability, and women choosing to move their superannuation over to new options like Verve Super that promise to only invest ethically.
Meanwhile in 2020, ‘male breadwinner’ style stereotypes that we’d like to think have been banished, actually still exist according to Shivani Gopal, CEO of Upstreet and The Remarkable Woman, potentially changing how women invest and whether they invest at all.
She says this may come down to how women saw their parents manage money while growing up, and seeing decisions being deferred to male partners. These stereotypes can stand in the way of women’s confidence.
“Women are more likely to invest in traditional investments like bricks and mortar property and lower risk investments such as cash and fixed interest,” she says.
She adds the pay and superannuation gender gaps don’t help – ultimately giving women less money to work with when it comes to their investment decisions.
Then there’s the gap in perceptions regarding how much money you need in retirement. According to 2019 Fidelity International Australia research, men believe they need 1.5 million for retirement, while women put the figure closer to one million.
Fidelity managing director Alva Devoy said their research also found that women are less likely to invest in the stock market than men, and points to a number of barriers and differences in investing that might explain why.
One difference is that women are more risk averse, an expected concern when you consider what women are already up against when it comes to accumulating wealth.
Almost half (46.2 per cent) of women say minimising risk is their priority when it comes to investing, compared with just over a quarter of men (26.8 per cent). Other differences include that women are more likely to believe they need “a lot of money” to get started.
“We found that a key difference is that more men are driven by the winning principle, whereas women tend to be more driven by goals, they want to invest or save to make money for say, a child’s education, for example” said Devoy.
Fidelity’s research also found women have less confidence than men in their financial knowledge and are more likely to believe they are better off putting their money into savings accounts.
One way women can counter some of these barriers is to get started on investing through one of the many online platforms available, said Devoy. “The best way to learn about investing is to just get in and do it. If we could get more women to try it, with a small amount of money, it will build a lot of confidence.”
A confidence boost may also come from looking at some of the many studies showing women achieve higher returns than men when investing, like that from Warwick Business School, mentioned above.
