Women and investment

An interesting piece of research earlier this year highlighted how women are often the savviest investors: for the past five years, female-run hedge funds have outperformed a broader, gender-neutral benchmark of their peers( 1). Given that several previous studies have produced similar findings, it makes you wonder why women are still so underrepresented in the industry. And why, more broadly, female savers have sometimes hesitated about investing in stocks and shares.

Money and jargon

You can cite loads of reasons for past caution – not least the fact that women have often reported feeling out of synch with a traditionally male-centric finance industry. A survey last year concluded that many feel “alienated” by jargon-filled marketing campaigns, which still seem mainly designed to appeal to older men( 2). It’s one reason why they’re more likely to hold their nest-eggs in cash – even now, when rates are so low that negligible returns from savings accounts are all but guaranteed. Our own research at Moneyfarm suggests that while nearly half of the female population ( 46 per cent) have no investments at all, just a third of men ( 33 per cent) are in a similar position( 3).

Things, of course, are changing. We’ve long known that the key to getting more women to take control of their financial destiny is to get them involved at a younger age. And a slew of trends – from better financial education at school, to the necessity of having to navigate the student loans system – means that is already happening. The ‘democratisation’ of finance has also boosted opportunities. Thanks to the plethora of online advice and investment sites, it has never been easier for women to educate themselves about investment. That marks a liberation. In the old days, when it was still customary for married women to leave financial matters to their other half, many suffered a traumatic introduction following death or divorce.

Mind the gap!

Formulating a long-term savings strategy is clearly in everyone’s interests, whatever their sex. But, arguably, it is even more important for women to start planning as early as possible in life than it is for men – because of the continuing ‘gender gap’. The persisting pay gap – on average women in paid work still receive about 18 per cent less per hour than men( 4)– and the fact that the burden of childcare is still more likely to fall on mothers are two compelling reasons why women need to tap the benefits of a longterm investment strategy. As things stand, most end up amassing a smaller retirement pot than their male peers, and the income from that pot may well need to stretch longer. Men in England and Wales are narrowing the life expectancy gap – by 2030 they’ll be living to 85.7 years on average, according to a Lancet study. But women are still predicted to live on average for two years longer( 5).

Fortunately, the finance industry has finally responded to this growing segment of investors by evolving into a more femalefriendly zone: the number of women in advisory roles continues to grow. Our view at Moneyfarm is that investment is ultimately a gender-neutral business. The most important thing is to make sure your portfolio is tailored in line with your aims and life goals as an individual – and at a level of risk that you’re happy with.

Women and risk

It has become a cliché in investment circles that men are more comfortable about taking financial risk than women – it’s all that testosterone, apparently. Perhaps there’s some truth to this. When asked about their approach to investing, the men in a Moneyfarm survey said they were much more likely to opt for a “medium risk” strategy than the women; and far fewer men than women declared a tendency “to take no risks” at all.

Nonetheless, a growing body of research suggests that when women do start weighing up the risk and reward equation, they seem to be rather good at getting the balance right. A 2015 analysis of 12 million US investors showed that female savers tended to enjoy better long-term investment returns than their male counterparts( 6)– in part because they’re better at resisting the temptation to trade too often, reflecting the wisdom of the old adage that ‘time in the market’ is generally a more effective strategy than ‘timing the market’. The main problem, it seems, was getting them to engage in the first place.

Make sure you don’t make the same mistake. In investment, there are always risks as well as opportunities and, when embarking on the journey, you need to consider your life goals and the level of risk you’re comfortable with – as well as the wider investment environment. Shrewd asset allocation can help protect your portfolio from any future volatility, while positioning it to take advantage of the best opportunities. Our experts are on hand to advise.

We believe that our focus on clients as individuals – whatever the make-up of their chromosomes – will put them on the path to long-term prosperity. Visit us at Moneyfarm.com and let us help you take control of your financial future.

Your capital is at risk. Investments can go down as well as up and you may get back less than you originally invested. Moneyfarm is authorised and regulated by the Financial Conduct Authority no. 629539.

1. Analysis of the HFRI Women index, quoted in the Financial Times www.ft.com/content/146a6c5c-0417-11e7-aa5b-6bb07f5c8e12

2. Survey conducted by Britainthinks for the Financial Times www.ft.com/content/514c9ed0-2987-11e6-8b18-91555f2f4fde

3. Yougov survey for Moneyfarm, February 2017

4. Institute for Fiscal Studies gender wage gap survey August 2016 www.ifs.org.uk/publications/8429

5. Lancet study quoted on www.bbc.co.uk/news/health-32512343

6. Fidelity survey www.fidelity.com/viewpoints/personal-finance/women-manage-money