Yahoo Finance Money opportunity 10 million 'outnumbered' Aussies are cashing in on
On International Women’s Day, it’s worth celebrating women’s natural skill as investors.
We recently learned about gender pay gaps among Australian companies and the results were pretty ordinary.
Across 5,000-plus private-sector employers, 50 per cent of firms pay their male workers over 9 per cent more than their female staff, according to the Workplace Gender Equality Agency (WGEA). Nationally, the median gender pay gap stands at 19 per cent. Over the course of a year, that gap grows to an $18,461 chasm.
However, the gender pay gap isn’t just about fairness. It also affects women’s ability to achieve financial security, and it has led to a gender gap in investing. The latest ASX Australian Investor Study found that male investors in Australia outnumbered women 58 per cent to 42 per cent.
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But women are closing the gap. More than 10 million Aussie women currently own investments outside of their home and super, up from 9 million in 2020, according to the ASX study.
Women have what it takes to be successful investors
What’s interesting is that research continually suggests women have the key traits needed to enjoy long-term investment success.
I put this theory to the test with the help of InvestSMART’s Portfolio Manager data. I should stress the data used was very general with no access to personal details other than gender. So, these are broad observations.
Nonetheless, a few findings stood out.
Women are more likely than men to identify as ‘conservative’ investors
Broadly speaking, women gravitate to a lower level of risk and are more likely to opt for a conservative asset allocation.
Men, on the other hand, are comfortable with a higher level of risk.
This really shines through in the way men typically have a far greater proportion of their portfolio in directly held shares, while women have a considerably bigger chunk of their money invested in cash than men.
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Women use managed funds more than men
While women may not be as comfortable picking their own shares, they don’t bypass equities altogether.
Female investors are twice as likely as men to hold units in managed funds – this includes exchange-traded funds (ETFs), many of which focus on shares. This suggests women prefer to seek professional help or entrust part of their portfolio to experts.
Is that a bad thing? Not at all.
As long as a fund charges low fees and has a track record of healthy long-term returns, it can be a great way to add diversity to a portfolio.
Women have more diverse portfolios
Women typically spread their portfolio across a wider variety of asset classes than men.
This greater diversification can mean lower volatility, which reduces the temptation to jump ship if one particular investment market hits a rough patch.
Women trade less frequently
Female investors are more likely than their male counterparts to take a ‘buy and hold’ approach and have a long-term focus. That matters because frequent trading may be fantastic for brokers, but it’s not so good for portfolios.
Overtrading often does little more than rack up unnecessary buy/sell costs, crystallise losses and/or capital gains tax, and it can leave investors sitting on the sidelines when market upswings occur.
If you’re not convinced about the merits of passive versus active investing, check out SPIVA research that confirms the overwhelming percentage of actively managed funds that fail to beat the market.
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Tips for women to get started
Sure, women can face financial challenges. However, females often have innate qualities that can drive success as an investor, even outperforming men on long-term returns.
So, why let all that natural talent go to waste?
Here are a few tips for women (and men) to get started investing:
You don’t need to be wealthy to grow wealth – as little as $500 can get you started in ETFs or shares listed on the Aussie stock exchange. From there, you can steadily add to your portfolio over time.
Think about risk and your investment timeframe – knowing how you feel about risk and how long you plan to invest for can go a long way to determining the investments best suited to your goals.
ETFs are a handy option – for diversity, low fees and simplicity, it’s hard to go past ETFs.
Start today – if you can, start investing as early as possible to harness the power of compounding. That said, it's never too late to begin. Every day you are investing is an extra day of making your money work hard for you.
Above all, you don’t have to be an expert to grow a rewarding portfolio of investments.
