Why we should all be listening to women investors

Taking on the gender investment gap The world of finance and investing still has something of an image problem. All too often, it’s the same story. It’s seen as being largely for those who are: ‘male, pale and stale’. Women... Read more

Blog4th May 2022

By Andrew Dines

Taking on the gender investment gap

The world of finance and investing still has something of an image problem.

All too often, it’s the same story. It’s seen as being largely for those who are: ‘male, pale and stale’.

Women make up a much smaller proportion of investors. It’s true that on average they earn less than their male counterparts – and they’re also more likely to lose out on potential earnings from career breaks (the so-called ‘motherhood penalty’).

No surprise then that there’s still a big ‘gender investment gap’. Women aged between 21 and 53 are thought to have half the amount set aside of men in the same age group.

But change is coming.

Research has shown that since the pandemic, women are changing their approach to investing*. Women want to diversify their investible assets – looking further than cash savings. They’re also getting wealthier, expected to control 60% of the UK’s wealth by 2052[1]. This makes it more important than ever that we as a profession pay more attention to one of the most under-served groups of investors.

Do women and men invest differently?

As financial planners it’s important we understand something about the psychology of investing, because this helps us ensure all our clients reach the best decisions for their long-term finances.

Everyone feels differently about planning their finances. All of us are prone to various types of biases that colour our perception of what makes a good investment. And research certainly backs up the case that there are often big differences in the way men and women behave when thinking about money.

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. Lower returns but more chance of a positive outcome.

Confident or cautious investor?

Of course, 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.

Investment approach by men and women

  Men Women
Cautious 29% 34%
Tentative 23% 23%
Confident 33% 29%
Ambitious 10% 7%
Adventurous 3% 3%

Source: Fidelity Global women and money study 2021
(survey of 12,038 adults in UK, Taiwan, Japan, Germany, China and Hong Kong)

Can being more risk-averse impact returns? Research from Hargreaves Lansdown showed women are more likely to keep their money in cash rather than investing in stocks and shares. This might seem like the safer option, but also puts returns at risk of being eroded by inflation.

What’s the reason for this added caution? One theory is that women can feel forced onto the sidelines by a male-dominated industry. One investment survey from Kantar found many even believe they are less competent at investing: “put off by an aggressively masculine approach to what can be complex and daunting transactions.[2]

Patience not panic

However, caution is also a good thing. Too much confidence (over-estimating your abilities and ignoring risk factors) might harm your investments. Some studies highlighted men’s tendency towards overconfidence. For example, one research paper found that overconfidence in men led to ‘overtrading’ – buying and selling too frequently on investment accounts. This cost their net returns by about 2.65% per year.[3]

Similarly, studies have shown women to be more patient investors – less prone to panic in tough time – a tendency that’s generally more suited to long-term investing. Figures from Boring Money suggesting women hold funds for 10.7 years on average, compared with 8.3 years for a man.

Patient investing is particularly relevant when it comes to turbulent periods in markets. When stock prices fall quickly, we often see panic-selling from investors, but this can be the more damaging in the long run. Downturns are only temporary, so staying calm (and invested) tends to be better for long-term returns.

Values are important

One especially interesting way in which women appear to differ is a marked interest in sustainability. Research shows that decision-making for women investors young and old isn’t just influenced by how big the final investment pot is. They’re more likely to take into account the world around them and want their portfolios to include environmental, social and governance (ESG) factors.

A UBS Sentiment Survey found seven out of 10 women investors said they took sustainability into account (compared with 58% of men). This makes women an incredibly influential socially conscious group of investors for the future.[4]

Read more about our approach to ESG here.

Paying attention

Undervaluing women’s voices in investing is a big mistake. Otherwise, the wealth management industry is just alienating half its potential clients.

As financial planners, we have a responsibility to all our clients to help ensure they everything they need to make informed decisions.

That means it’s absolutely essential that the advice we give and the products we discuss with you reflect your needs and give you the confidence to know that whatever step you take is the right one for you.

* Nutmeg – Are women changing the way they think about investing?

[1] Barclays – How women’s wealth is driving economic change

[2] Kantar – Winning Over Women

[3] Irrational Behaviour and Stock Investment Decision. Does Gender Matter? M. Siraji, M. C. Abdul Nazar, M. S. Ishar Ali

[4] Women and investing – UBS

By Andrew Dines

Related services

  • Planning my financial future

Sign up to updates

  1. Blog14th Sep 2023

    Dad and son working together in family business smiling

    Succession without the backstabbing – how to be positive with your estate planning

    Betrayal, backstabbing and bitter sibling rivalry in HBO’s Succession made for gripping TV. But in real life most people would prefer their estate planning to be a little less complicated. Here’s how to get it right – without all the... Read more

    By Andrew Dines

    View more
  2. Blog22nd May 2023

    What do chatbots mean for your financial advice?

    ChatGPT has gone from strength to strength since launching last year, opening up a huge debate on the role artificial intelligence (AI) plays in society. But would you take financial advice from a chatbot – or trust it with your... Read more

    By Andrew Dines

    View more
  3. Blog9th Dec 2022

    Financial wellbeing, happy couple, sitting on sofa, using ipad, looking at finances

    The link between finance and wellbeing

    The current economic climate and cost of living crisis in the UK makes for bleak reading to say the least. With families facing the biggest fall in living standards in 60 years, economic activity shrinking for the fourth month in... Read more

    By Andrew Dines

    View more
  4. Blog9th Aug 2022

    Protect your pension – how to stay ahead of the scammers

    Summary: Pensions are a growing target for fraudsters. With scams becoming increasingly sophisticated, we’re always trying to find new ways to stay ahead. Earlier this year, the former Newsnight presenter Emily Maitlis revealed on Twitter how close she’d come to... Read more

    By Andrew Dines

    View more

Share this page