Women are the best investors
( So why are so few prepared to try it? )
MOST people can name a top female entrepreneur. Dragons’ Den’s Deborah Meaden, Karren Brady of The Apprentice or Facebook’s Sheryl Sandberg to name but three. But the same cannot be easily said for female investors.
The proportion of women managing investment funds has doubled in r the past five years, but men still dominate the industry – almost 91 per cent of more than 2,000 UK funds are managed by men, according to research by wealth manager Tilney.
While women are more likely to be in charge of household bills and the family budget, they are also far less likely to take the step into investing.
Research by fund management group Fidelity discovered that while 43 per cent of women save money into a cash Isa, just 9 per cent invest in the stock market. According to the most recent Government figures, 5.1 million women in the UK have a cash Isa but just 872,000 have a stocks and shares Isa.
Yet there is a wealth of research to suggest that women make better investors than men.
A study in the 1990s found that men tended to be overconfident and traded their shares 45 per cent more often than women. Females tend to be ‘buy and hold’ investors with long-term goals that they stick to – a strategy recommended by experts if only to dilute the negative effect that the cost of regular trading has on returns.
Having a long-term goal keeps people focused on why they are investing. It also means they are likely to make regular contributions. This allows women to benefit from the snowball effect of compounding – when interest is earned on interest – and prevents common investment mistakes such as buying when share prices are high and selling when they are low.
There is evidence among professionals that women make great investors, too. The Baillie Gifford Japan Trust, managed by Sarah Whitley, has returned an impressive 258 per cent over the past five years, compared with the average among Japan funds of 179.5 per cent.
Meanwhile, Lesley Duncan’s Standard Life Ethical fund is up 100 per cent over five years, compared with an average return of 69 per cent among other UK All Companies funds.
Despite this, more than a third of women surveyed by Fidelity said they did not feel confident enough to invest in the stock market.
Thirty-one per cent said they did not have enough knowledge to invest, while 30 per cent were worried about the risk.
Kristina Wu started investing two years ago after receiving a letter from her bank warning that her already paltry savings rate was about to get cut again. The 25-year-old IT project manager picked a selection of funds from a top 50 list compiled by Fidelity, but was disappointed by how few female fund managers there were to choose from.
‘Only one of my funds is managed by a woman, but it is doing really well. It definitely feels like a man’s industry – I do not know any other women who are comfortable with the idea of investing. It is certainly intimidating when you start,’ she says.
While Kristina, who invests around £100 a month, is the only one in her circle of female friends who invests, her boyfriend Dan has a stocks and shares Isa too – but they have different approaches. Kristina, who lives in Croydon, South London, and is saving for a house deposit, says: ‘Dan definitely takes more risk than me. I pick funds and keep them, whereas he likes to buy and sell company shares.
‘I think women tend to be more cautious. They think about what they are investing for over the long term rather than just trying to make a quick buck. We are more patient and willing to sit through the ups and downs.’
Maike Currie, investment director at Fidelity, says: ‘The reluctance of many women to invest is concerning, especially considering that they still usually earn less than men, tend to live longer and are more likely to take a career break to start a family or look after a sick or elderly relative.
‘It means women are suffering a double whammy of having less to save in the first place, and then getting lower returns on their savings because they are not investing.’
Figures show the dramatic effect of sticking with a cash savings account rather than investing in the stock market. Someone who invested £15,000 in the FTSE All-Share Index five years ago would have seen that turn into £24,787. Had they put the same amount into the average cash account it would have grown to just £15,122.
Jean Roche, fund manager at Schroders, says: ‘Because women typically earn less than men, they have less money to lose, which means they may be less willing to take a risk by investing it. But actually, not investing can be the more risky option when savings rates are low and inflation is high.’
She adds: ‘We need to make investing more of a normal thing to do. It is a bit of a secret that there are any female fund managers at all. Perhaps if more people knew, it would encourage more women to invest.’